Dive Brief:
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Growth in housing activity is fueling siding sales, with builders increasingly turning to small- and mid-sized contractors for installation and those contractors relying on distributors for product purchases, according to a new report from Cleveland-based market research group Freedonia. Distributors’ U.S. siding sales are expected to increase 7.7% annually to $4.7 billion by 2021.
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Together, the six segment leaders — ABC Supply, Associated Materials, Beacon Roofing Supply, Builders FirstSource, Home Depot and Lowe’s — took a one-third share of distributor siding sales in 2016. These companies continue to expand their services through job site delivery, preferred programs and credit assistance, and more material offerings.
- For most siding distributors, sales today come from small contractors targeting local and regional markets. Increasingly, manufacturers are targeting this market through the distributor channel, rather than direct sales, to complete on volume pricing.
Dive Insight:
Material prices are on the rise, and builders and their subcontractors are beginning to feel the burn. Softwood lumber is the biggest area of concern currently, according to the Bureau of Labor Statistics' Producer Price Index. Prices in that category rose 2.3% in March and are up 12.9% year-over-year. Some products in the category have seen annual increases of more than 25%.
An announcement by the International Trade Commission is expected next week concerning whether, and to what extent, the U.S. will apply countervailing duties on Canadian softwood lumber imports. A separate decision on antidumping tariffs is expected in May. While the move is meant to spur domestic production and make those products more competitive, it could lead to continued price pressure in the near-term as lumber producers gear up.
More generally, construction material prices have risen for four-straight months, increasing 0.3% from February to March and 4.4% year-over-year. Surging material prices was one of the biggest concerns among pros heading into 2017, with many worried that the rising cost of doing business could hamper construction activity.
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