TEXTILES.ORG
By Jeffrey Rasmussen
While U.S. geosynthetics manufacturers and distributors assess 2009’s lackluster performance, they can also look forward to the possibility of meaningful improvements before the end of this year.
Sales in 2009 were down about 4-5%. However, a slow but steady growth is expected this year and into 2011.
The decrease in sales and profit margins for U.S. geosynthetics manufacturers and distributors in 2009 was due primarily to the lack of publicly funded projects, state budget deficits, and the tight credit and lending situation. The significant downturn in the economy was the driving force behind tight credit conditions and a widespread lack of publicly funded projects across the United States. Because of these issues, contractors and state transportation departments are expected to be cautious in hiring and spending decisions while they wait for Congress to pass a new federal transportation bill, which could happen as soon as autumn 2010. Overall, the value of highway, street, and bridge construction in 2009 was about $84.8 billion, up 3.6% from 2008. It is expected to reach about $90.5 billion in 2010, up about 7% over 2009.
Uncertainty regarding the multiyear federal transportation reauthorization bill and future growth of the overall U.S. economy—and the availability of stimulus money—will determine if the U.S. market materializes into a growth year for many U.S. geosynthetics manufacturers, suppliers, and distributors in 2010. To date, more than 77% of approximately $50 billion dollars in stimulus funds has been committed to road and bridge construction projects, but only 4 billion, or 16% of the total funding available, has been paid to contractors. So, there is much unfinished work ready for completion in 2010. This should bode well for improving the sales and profit margin prospects for U.S. geosynthetics manufacturers and distributors.
History
Geosynthetics is the term used to describe a family of predominantly polymeric products used to solve civil engineering problems. The term encompasses eight main product categories: geotextiles, geogrids, geonets, geomembranes, geosynthetic clay liners, geofoam, geocells (cellular confinement), and geocomposites.
The polymeric nature of the products makes them suitable for use in the ground where high levels of durability are required. Properly formulated, however, they can also be used in exposed applications.
The use of geosynthetics has expanded rapidly into nearly all areas of civil, geotechnical, environmental, coastal, and hydraulic construction. Many durable polymers (plastics) common to everyday life are found in geosynthetics. The most common are polyolefins and polyester, although rubber, fiberglass, and natural materials are sometimes used; however, more than 90% of geosynthetics are made of polypropylene.
Since their introduction in the late 1960s, geosynthetics have proven versatile and cost-effective ground modification materials. Geosynthetics also have become essential elements as barriers in environmental and hydraulic applications. There are more than 40 manufacturers of geosynthetics that provide products for the North American marketplace—more than half located in the southeastern U.S. or Texas. The industry provides about 12,000 jobs in the U.S. in manufacturing, fabrication, distribution, and installation.
A competitive climate
Results from IFAI’s geosynthetics manufacturer/distributor climate survey in February 2010 showed a very competitive environment for geosynthetics players in 2009, driven largely by the reduced expenditures and budgets in state and local governments, a continued slow economy and market growth, and higher raw material and energy prices.
Trends and their impact on the 2009 U.S. geosynthetics market, as cited by manufacturers and distributors in IFAI’s survey, show a range of difficult challenges. Increased competition pushed prices lower by as much as 5-10%, resulting in thinner profit margins. With the market shrinking plus industry consolidation, there were market opportunities for some, but others reduced operations and became more focused, or closed their doors altogether.
With less spending on infrastructure and roads, there were fewer projects, and sales dropped by as much as 40%. High raw material prices further reduced sales and profit margins. With customers also experiencing tight cash positions, they were reducing inventory and looking for faster turnaround times on orders.
An improved outlook
While 2009 was a trying time, manufacturers and distributors are optimistic that 2010 will yield better results for geosynthetic businesses.
Results in 2009 from IFAI’s geosynthetics survey show that 77% reported unfavorable sales growth, 53% kept their employee head count the same, 18% decreased their head count by 1-5%, and 18% decreased their head count by more than 5%. However, 56% reported that they expect to have favorable sales in 2010. Only 18% reported that they expect to have unfavorable sales in 2010.
In the survey, geosynthetic manufacturers and distributors cited three main investments they made in 2009 to help them fuel growth and overcome industry challenges. New product introductions led the way with a 16% share of investments made. Marketing/sales promotion was the second-highest investment at 13%. The third investment, with an 11% share, was improving manufacturing processes.
Looking ahead, geosynthetics manufacturers and distributors are hoping for a boost in sales from the injection of funds by the U.S. government’s stimulus program. In fact, the increase in infrastructure development in 2010 is expected to be the largest investment for repairing the U.S. road and bridge infrastructure since the federal highway system in the 1950s.
With the infusion of government funds in infrastructure development, geosynthetics manufacturers and distributors say they need to continue their commitment to educating key market influencers, such as civil engineers who specify the materials used for building roads, bridges, reservoirs and other civil engineering projects. A united effort on this front will help expand the number and scope of geosynthetics projects in the future.