Building insulation sales

Construction Review, Sept-Oct, 1984

In response to the housing upturn in the first half of 1984, sales of building insulation have increased significantly from the low levels of 3 years ago, when the physical volume of fiber glass structural insulation shipments, for example, declined 8 percent below the average of the preceding 4 years. In 1981 and 1982, the housing "retrofit" (i.e., addition of thermal insulation to homes) market collapsed, largely because of relatively small increases in energy costs. The new building insulation market also fell sharply, as new private housing starts dropped to 1.1 million in each of those years. With the exception of office buildings, nonresidential building markets also were weak.

Near the end of 1982 and throughout 1983, new housing starts increased, and they remained at healthy levels through the first half of 1984. In addition, slightly lower interest rates and the improved economy triggered a substantial increase in the housing rehabilitation market. Together, these developments have increased building insulation sales. An insulation industry trade association reports very strong sales by its members this year. Sales and production data appear in the table at the end of this comment.

Contributing to the resurgence in demand for residential reinsulation work is the Department of Energy's (DOE) Residential Conservation Service program, which requires large electric and natural gas utilities to inform their residential customers of the benefits of energy conservation measures, to make energy audits of customers' homes if requested, and to offer to arrange for the installation and financing of insulation and other energy-saving materials.

Also helping to increase the demand for insulation is DOE funding for home weatherization work (which includes insulation jobs). DOE estimates that 235,000 homes were weatherized in 1983, up 46 percent from the estimated 161,000 homes that received energy-conserving work in 1982. As of this writing, the U.S House of Representatives has passed legislation to provide $200 million for this activity in fiscal 1985, and a U.S. Senate bill (still in committee) would allocate $190 million, as was appropriated for fiscal 1984.

Despite these positive developments, the long-term outlook for residential retrofit work, is for a continuing decline, as more recently built homes are better insulated, and a saturation point will be gradually reached in the older home market. A private industry survey shows that since 1980 the reinsulation of residential attics has fallen 6 percent annually. Nevertheless, the number of residential attics that were reinsulated in 1983 was greater than that in 1982, and it is expected that the number that will be reinsulated in 1984 will be approximately equal to the number in 1983.

Sales of insulation for new nonresidential buildings in 1984 will be about the same as in 1983, continuing a high level of sales of duct board, duct wrap, building envelope, and pipe insulation.

The insulation material sales increases appear to be concentrated mainly among the mineral wool products (i.e., fiber glass and rock wool) and plastic foams. The cellulose insulation industry is not prospering. According to an industry survey, cellulose insulation manufacturing sales fell from $39.4 million in 1982 to $36.3 in 1983 as production declined from 689,000 tons to 634,000 tons. Also, from 1982 to 1983, the cellulose insulation manufacturing industry lost 25 producers, falling to 169 firms. Cellulose insulation is rarely used in new housing and nonresidential building construction, and therefore has not shared in the general increases of the past 3 years in which new housing has been the primary factor behind building insulation market recovery. The cellulose retrofit market, while still sizeable, is gradually declining, and thus cannot provide a basis for future growth.

Shipments of plastic foam insulation products are doing particularly well. According to one marketing report on building insulation materials, shipments of expanded polystyrene foam, polyurethane foam, and polyisocyanurate foam increased 11.5 percent, 7.2 percent, and 22.2 percent, respectively from 1981 to 1984. Data on two of these foam insulation materials (not from the marketing report noted above) appear in the table in this comment.

Some new insulation techniques are making it possible to open up new markets, especially in commercial and industrial structures. The new spray-on methods, using mastic with cellulose, rock wool, and fiber glass insulation, are especially applicable to "open applications," that is, walls which are not enclosed. Metal building structures are a prime example of this.