Construction: Building from the Ground, Up

 

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A traditional end-use market for composites, construction demand is mostly in the form of bath tubs, shower stalls, flat, corrugated and architectural grade panels, residential doors, garage door skins and window frames. New housing starts and remodeling expenditures, the primary drivers of composites usage, have been miserably weak the last few years. During October, the industry built homes at a seasonalized rate of 628,000 per year, demonstrating the rate of builds has fallen 70 percent from its peak in 2005 but up from 598,000 last year. Many contractors and lending institutions have been driven to bankruptcy. Nearly 2.3 million jobs were lost in construction since 2006, and the rate of unemployment in construction is 13.4 percent or 1.6 times the national average.

The U.S. housing market is still bouncing along the bottom with recent data showing no encouraging news. Housing starts and permits data indicate no meaningful improvement and the same applies to existing home sales (starting to inch upwards) and home prices (still falling). There is still a large inventory of existing homes for sale, due in part to weak demand and credit that remains tight in the wake of the mortgage crisis. This has led to the erosion in home prices, lenders further tightening lending standards and buyers sitting on the sidelines.

Economists predict little improvement in housing before 2013. Global Insights estimates single family housing starts declined 11 percent to 419,000 in 2011 and will grow only 5.3 percent in 2012. Only in 2013 will we see any meaningful gain—a 51 percent jump to 664,000 single family starts followed by another 42 percent gain in 2014 to 992,000 units. That still leaves a considerable gap to overcome before reaching the pre-recession level of 1.7 million homes. Previous forecasts for improvement in 2012 had been dependent on stronger employment growth to revive housing formation and absorb excess supply. Pent-up demand for housing is accumulating as young adults remain at home but at some point will contribute to a revival in housing activity.

Energy: Increased Momentum, Gaining Speed

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The wind energy sector experienced a sharp decline in 2010 from 9,922 megawatts (MW) installed in 2009 to 5,217 MW in 2010. Experts state this was a delayed reaction to the global financial crisis and was compounded by the absence of fresh capital, relatively low natural gas prices, softening wholesale electricity prices and slumping overall demand for energy. But it has shown strong recovery through the third quarter of 2011. 3,360 MW of new wind capacity was installed, up 74 percent from the first three quarters of 2010. Going into the fourth quarter, the American Wind Energy Association (AWEA) reported that over 90 projects were under construction amounting to 8,482 MW. If half of these open projects are completed by year end, approximately 7,600 MW of new wind capacity will have been installed in 2011—a 46 percent increase over 2010—but still short of the record 9,922 MW installed in 2009.