BRICK MARKET OVERVIEW: Steady Growth Continues in the Brick Industry
With about 80% of all U.S. brick shipments used in residential applications,1 it makes sense that the record level of U.S. housing starts in 2003 had a positive impact on the brick industry. According to the U.S. Department of Commerce, production of common (building) and facing brick edged up 1.5% in 2003 to 8.6 billion units. Shipments rose 5.9% to 8.5 billion units valued at $1.8 billion (+6.2% from 2002).
In the Brick Industry Association's (BIA) annual survey of its members, which represented U.S. shipments of approximately 7.9 billion units, the South Atlantic region (including Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia and Florida) accounted for 39.4% of 2003 shipments by origin, while the East South Central region (including Kentucky, Tennesee, Alabama and Mississippi) represented 20.6%, and the West South Central region (including, Arkansas, Louisiana, Oklahoma and Texas) accounted for 18.3%. These regions were also the largest by destination, with the South Atlantic garnering 33.3% of shipments; West South Central, 20.5%; and East South Central, 16.5%.1
So far, the positive trends appear to be continuing into 2004. U.S. Department of Commerce data shows that production of common and facing brick remained strong in the first quarter, gaining 8.2% over the first quarter of 2003 to 2.2 billion units. Shipments posted a 15.5% gain to 2 billion units valued at $440.4 million (+19.6%).
In the U.K., Hanson plc reported that brick volumes have been lower in the first half of this year as new building activity currently favors apartments rather than houses. However, a strong pricing environment is helping the company offset increases in production costs such as gas and electricity. Hanson also noted that both the residential and commercial building markets in Australia remain strong.
Wienerberger AG, which is the parent company of U.S.-based General Shale Products, LLC, reported that Central Eastern Europe (particularly Poland and The Czech Republic) has shown substantial growth this year. Despite an apparent slowing in the pace of new residential construction in Hungary and a decline in the Polish market in the second quarter (after unusually strong first three months in 2004), the company believes that the positive economic development in Eastern Europe will continue.
In Western Europe, Wienerberger noted that it was experiencing good capacity utilization of its plants in the strong markets of Italy and Switzerland, with France and Belgium also showing evidence of continued solid demand. While the markets in Holland and Germany remain sluggish, the company believes that the basic demand for new housing is higher than indicated by construction starts in those countries, possibly signaling an upswing in growth potential.
According to Boral Ltd., Asia is also a strong market for brick, with housing activity in Thailand particularly buoyant. However, the company reported that the South Korean construction market experienced some softening during the year.
Overall, brick manufacturers remain optimistic about the worldwide prospects for brick sales. In the U.S., the residential market is expected to cool off slightly from its record high levels, as interest rates begin to rise. However, the commercial construction market appears poised to recover, which could help offset any declines in the residential sector.
The key factor for all brick manufacturers to watch is other building materials. According to the National Association of Home Builders, brick is the exterior material of choice for approximately 19% of single-family homes and 20% of multifamily homes, ranking second only behind vinyl siding (28% and 33%, respectively).2 However, the percentage of brick used in single-family homes has remained fairly steady over the past several decades, while market shares of vinyl siding and other materials (such as stucco) have grown significantly. Additional innovation in marketing strategies and installation techniques will be needed for the brick industry to remain competitive.
Editor's note: The foregoing information (except where noted) was compiled from publicly available information in annual reports and news releases.