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Growth in PVC Electrical Markets After the Pandemic

September, 2021

According to the Wall Street Journal and the Chief Global Economist at Decision Economics, Allen Sinai, the current U.S. economic situation is “without historical parallel.” The COVID shutdowns caused an economic downturn followed by a boom in the U.S. economy which have created unprecedented growth accompanied by major shortage of goods, raw materials and labor. This lack of supply is happening much faster and on a much larger scale than during any other economic rebound in history. Nevertheless, the experts predict the size of the economy to surpass pre-pandemic levels with the end-of-year GDP reaching the path forecasted before the pandemic ever happened.1

With all the very unusual changes impacting the economy, construction, and the electrical industry since the onset of COVID, forecasting PVC electrical product market trends for the remainder of 2021 might seem like an impossible task. However, these unprecedented disturbances don’t make forecasting insurmountable for the experts. Most data analysts are actually forecasting that even amidst all the chaos, the outlook is very good for the balance of 2021 and into 2022. According to marketwatch.com, the global PVC pipe market size is projected to reach over USD 61 billion by 2026, from USD 58 billion in 2021, at a CAGR of 4.5%. This increase will be steady despite all the difficulties the industry and the economy have faced.2  Additionally, according to forconstructionpros.com, Dodge Analytics predicts a very positive outlook for the construction economy as a whole with construction starts bouncing back this year and next from the 9% decline in 2020 brought on by pandemic shutdowns. U.S. total construction starts are forecasted to be up 4% in 2021, moving from $778 billion to $810 billion, before climbing another 8% in 2022 to $877 billion.3

This growth happening hand-in-hand with the backlash of problems created by COVID and other recent events has created a challenging scenario for the PVC electrical market with demand dramatically exceeding supply. In a recent report, KPMG called this demand over supply imbalance in the economy a "disequilibrium caused by COVID."This growing demand in the middle of significant supply issues is putting a major strain on PVC pipe and fittings manufacturers, distributors and suppliers.

"The lack of supply resulting from the COVID backlash of production interruptions and labor shortages was worsened by the record-breaking storms in February of 2021, which caused major production interruptions for all 4 major US resin suppliers, forcing several of them to declare force majeure. While the resin supply has improved since the beginning of the year, it is still limited, causing continued constraints, elevated costs, and production concerns for many. Now we are facing the impact of Hurricane IDA, which closed most of the resin plants once again. We don’t yet know the full impact of IDA on the resin supply," explained CANTEX Vice President of Sales and Marketing Dave Milius.  

"This market condition will likely continue through the balance of 2021, and some effects will most likely linger into 2022. The current situation, with its rising resin costs, is expected to keep PVC prices elevated for the balance of 2021 and into 2022," added Milius.

Additionally, the latest data from the Bureau of Labor Statistics shows that the Producer Price Index (PPI), a measure of inflation, is up by 6.6% from last year with prices rising even faster in the construction industry. The PPI for construction materials increased 17% since last year. Fortunately, the Federal Reserve anticipates that inflationary pressure is a temporary side effect of the rapid reopening of the economy. The National Association of Home Builders (NAHB) expects prices to get lower as the ongoing global supply chain issues get resolved. The NAHB also predicts the Federal Government will announce tapering of mortgage bond purchases in the near future, causing rates to increase at the end of 2021 and possibly rising above 4% in late 2022.5

Despite all these challenges, Dodge Data & Analytics also shows increases for construction starts in most sectors for the remainder of 2021 and 2022 with total U.S. construction starts climbing 8% to $877 billion in 2022. This figure will surpass the 10-year high point of $856 billion in 2019. Dodge Data indicates that some sectors will see greater gains than others. For example, commercial construction is projected to grow by 6% this year (after the large drop caused by the pandemic in 2020) and another 10% in 2022. The tremendous growth in warehouse construction starts brought on by the sharp climb in e-commerce business is the largest contributing factor to growth in the commercial sector.6 Dodge Data also indicates that although office starts fell 22% in 2020, they are expected to rebound by 8% in 2021 and another 10% in 2022. The largest percentage of that increase will be in data centers, which are forecasted to jump 40% this year and rise even more in 2022. Dodge data also indicates that although institutional building construction fell in 2020 with recreation, transportation, dormitories and religious buildings taking the biggest hit, this sector is expected to increase by 7% next year.7

There will also be an increase in highway and bridge construction, resulting from the Federal Government’s Highway Bill reauthorization. Similarly, additional government spending from a trimmed down version of the American Jobs Plan is expected to help increase construction in the areas of affordable housing, public transit, education and other infrastructure initiatives.8

Similarly, the NAHB predicts healthy labor market improvements as vaccination rates increase and COVID restrictions are lifted. They predict unemployment to fall below 5% by the end of 2021. This decrease in unemployment will undoubtedly help improve production and logistic rates for construction products.9

Additionally, according the latest report by Researchdive.com, the home improvement market will also continue to grow into next year and beyond. With the new post-COVID home office surge, remodeling growth will continue as people use their homes for work and spend more time spent at home.10 Statista.com reports that home improvement sales in the U.S. amounted to 400 billion U.S. dollars in 2020 and will reach 500 billion dollars by 2024.11

Despite all the post-COVID challenges, The Global Utilities Market Report indicates that the global utilities market is expected to grow from $4230.3 billion in 2020 to $4534.38 billion in 2021 at a CAGR of 7.2%.  The market is expected to reach $5996.57 billion in 2025 at a CAGR of 7%, bringing about a steady flow of new construction opportunities in need of PVC electrical products.12

According to NAED’s research and data forecasts, the construction comeback varies by region with the Midwest outperforming the nation because of its lower unemployment rate and strong GDP. Additionally, mixed-use commercial construction is being built everywhere in the Midwest. NAED also points to the South for strong construction growth. The NAED construction index also shows growth in the Houston and Dallas Metropolitan areas and in secondary markets in the Midwest. 13

“For CANTEX, PVC product sales have increased even more than industry forecasts. Construction starts in all sectors are definitely trending higher, but the mix of construction starts experiencing significant growth is changing. Fortunately, PVC products are ideal for many of the sectors that are experiencing substantial growth, like utilities, data centers and warehouses. Although there are many challenges caused by the supply and demand disequilibrium from COVID and other factors, there is also great opportunity. CANTEX will continue to take a proactive stance by doing whatever we can on our end to improve supply for our customers and targeting the markets anticipated for growth,” said Milius.

1. The Wall Street Journal, The Economic Recovery is Here. It’s Unlike Anything You’ve Seen.

2. Marketwatch.com

3.  Forconstructionpros.com

4. KPMG.us, Economic Growth in a Time of Disequilibrium: Examining supply and demand

imbalances caused by COVID-19

5. TED Magazine, August Issue, Growth with Inflation

6. Global Newswire

7. Forconstructionpros.com

8. Forconstructionpros.com

9. Global Newswire

10. Researchdive.com

11. Statista.com

12. Global Newswire

13. TED Magazine, August Issue, Growth with Inflation