Product of the Year

Home Channel News, Jan 10, 2000

Last summer, when prices for GYPSUM WALLBOARD were rising every two weeks and demand had squeezed supply dry, dealers were wondering out loud whether shortages of this commodity would prevent them from exploiting the final stages of the latest home-building boom.

Market conditions -- bankruptcies, leveraged buyouts, takeovers, asbestos-related lawsuits -- that hamstrung wallboard manufacturers from adding capacity over the previous decade were finally catching up to an industry whose demand, since 1990, had outpaced the ability of suppliers to meet it.

"Simply put, the industry as a whole has not invested in adding capacity for a long time," said a spokesperson for United States Gypsum, the industry's largest supplier. USG as early as 1996 earmarked $32 million to accelerate the productivity at six of its plants, which last year were pumping out 600 million more square feet of product.

Indeed, 1999 marked a new commitment on the part of suppliers to increase their production. Five major suppliers -- USG, National Gypsum, Celotex, Georgeia-Pacific and Lafarge -- announced their intentions to open, expand or upgrade II facilities.

For example, in November, National Gypsum said it will spend $14.5 million to expand its wall-board factory opened in the San Francisco area in 1964. That project would increase the plant's capacity 44 percent, to 325 million square feet. James Hardie spent $60 million over two years to upgrade and expand its facility in Nashville, Ark., to 14 acres under one roof that can now make 1.4 billion square feet annually, or 500 square feet per minute. The company also said it would invest. $17.5 million in a nearby gypsum mine.

However, as dealers continued to see prices rise -- as much as a $3 per sheet in November alone in some markets -- and waited for more product to flow into the supply pipeline, they were forced to search the globe for new sources. The Gypsum Association stated in October that its members. had seen wallboard coming into the United States from at least 11 countries, including Poland, Chile, Norway and Argentina.

The Freedonia Group, a Cleveland-based market researcher, estimates that demand for wallboard would hit 31.5 billion board feet in 1999 and that manufacturers will add more than 8 billion square feet of production capacity by 2003. However, Freedonia also pointed out that demand may be tailing off next year, especially in light of the prediction by the National Association of Home Builders that residential housing construction would be off 73 percent in 2000.