October 2005

Volume 6 Issue 9 October 2005

The Wrath of Katrina
Manufacturers and Suppliers Cope with Hurricane's Aftermath
by Sarah Batcheler

Some Hurricane Katrina damage estimates are predicting this storm could very well be the most costly and destructive natural disaster to impact North America.

It has affected many facets of life for countless people including those in the door and window manufacturing and supplying industry. Many of the companies which had halted operations due to the storm will be overwhelmed with work once people begin to rebuild their homes.

Manufacturers all across North America have experienced delays in deliveries, and they anticipate a vast increase in the demand for product in the long term. It may be too early to tell how the building industry will be affected by the storm and which areas will adopt new building codes—but it’s not too early to bring you the latest on the suppliers in these tattered areas or the effects felt by manufacturers of doors and window products.

Impact on Suppliers
In addition to maintaining the structures that housed owners’ businesses, companies in Louisiana, Mississippi, Alabama and Florida had to deal with their own homes and safety of their families and those of their employees. The scene is grim, yet companies are getting back on their feet in anticipation of a booming demand for building products.

In Hattiesburg, Miss., at the location of Distinctive Doors about 60 miles from the coast, the image resembles the remains of a bomb dropped, according to Thomas Sellers, the second person working at this two-man shop.

“Several of our employees suffered trees in their homes and some damaged vehicles, but everyone was alright. The plant was okay, other than a tree or two being down,” says Alicia Abby, personnel at Southwood Door Co. in Quitman, Miss.

Affecting Operations
Some businesses in the affected area experienced a bigger hit in operations than others. Being without electricity was the most common reason why companies operations were halted.

“We missed three days of operations because of the power outage. But we are located right by a subway station so we were up and running pretty fast. It was just a matter of getting our employees here,” says Abby.

“Our company was closed for six days—which has led to a huge back up,” says Karen Nobles, secretary of Dixie Glass Co. in Hattiesburg, Miss.

“The millwork company is located in a place that still doesn’t have power, they are working off of generators [as of September 14] There will be lots of repair work—it’s crazy,” says Sellers.

In the wake of such a terrible disaster, there will be a huge increase for suppliers and manufacturers of door and windows. Dixie Glass Co. reports having already experienced a 75-percent increase in sales because everyone is ordering the supplies they need for their homes, according to Nobles.

Sellers, who works in just a two-man shop that specializes in stained and beveled glass says they are starting to get calls for repairs. However, some retailers are wondering how they will be able to supply all those in need.

“There is going to be such a demand for everything that the manufacturers may not be able to keep up. Our company just retails, so we will probably be very busy as soon as people can see adjusters,” says Hatten.

Most people are still waiting for insurance adjusters to access damages, so companies are not bombarded yet.

“There are a couple thousand adjusters in this city alone working 24-7,” says Sellers.

Impact on Manufacturers
Ben Wirz, vice president at FLT Glass in Miami, has felt the impact as the hurricane codes and emerging building codes in the South have propagated up the Gulf States.

“For us, Katrina did come down here in Miami first as a category one storm. The short term impact of the storm on our operations is that it is a deterrent to business. We were unable to deliver to some clients because they weren’t operating,” says Wirz.

Other door and window manufacturers have experienced the halt in deliveries to the affected areas, and are anticipating the boom in demand for product.

“At this point, we are experiencing nothing other than minor scheduling issues due to the hurricane. This will likely change as the rebuilding begins and material and supply shortages begin to surface,” says Dave Olmstead, public affairs and code compliance specialist for PGT Industries in Venice, Fla.

“Our distributor in the area is expecting an increase in sales due to the vast devastation, however right now many people in the area are still trying to pick up the bits and pieces that were left behind in the storm,” says Ann Mayer, marketing communications coordinator for Kolbe and Kolbe Millwork.

Looking in the Future
For those manufacturers who specialize in products for the coastal regions, the long term impact of the hurricane guarantees that there will continue to be a need for product.

FLT Glass, which specializes in tempered and laminated glass, has seen an increase in demand for its product as the codes move up the coast.

“The growth we experienced this year is a result of the 2004 hurricane season,” says Wirz.

In the rebuilding of an entire affected region of the country, there will be increased demand for a number of products related to the building industry.

“With the wide array of door and window products that we produce, we believe that we can offer the homeowners a number of alternatives in the repair and replacement of older or damaged units ... In reviewing the manufacturing needs that may be required, we feel that the additional units that will be required can be accommodated for in our process,” says Jeff Delonay vice president of manufacturing for Kolbe and Kolbe Millwork.

PGT Industries, which manufactures an impact-resistant product line called Win-Guard has also seen a steadily increasing demand since the hurricane season of 2004.

As far as the impact of Katrina, it may take many months for manufacturers to notice an increased demand for products. Another result of the hurricane is that it will probably draw some awareness to the importance of impact-resistant products.

Silver Line of North Brunswick, N.J., has just launched the first installation of impact-resistant products. The company has manufacturing plants in New Jersey and Lithia Springs, Ga., a suburb of Atlanta. Neither was hit by Katrina.

Andy Karr, sales and marketing director at Silver Line indicated that the company’s distribution lines have been hurt by the storm.

“We know of 11 Home Depot stores that we can’t deliver to because of the damage from the hurricane. There has been a shortage of gas, especially in Atlanta; however that seems to have overcome itself.”

Paying at the Pump
Higher prices at the gasoline pump are affecting manufacturers on a daily basis.

“We are suffering from the increase in fuel cost, like other manufacturers,” says Karr.
“It’s difficult to say if the raising cost of gas will eventually reflect in the products’ consumer price. It will depend on how long the prices will sustain. Eventually, there may have to be a fuel surcharge or delivery fee, but we are biting the bullet for the time being.”

Other manufacturers, such as PGT Windows, echoed the concern for cost of gasoline.

“Obviously we are incurring increased transportation costs. The gas prices are already coming down so the net effect won’t be measurable until these costs stabilize,” says Olmstead.

ABC Window Co. located in Ontario, Calif., has indicated an impact from the natural disaster.

“We have already seen some increases in costs related to higher prices of both gasoline and natural gas and we are anticipating additional cost increases, in part resulting from increased transportation costs and in part resulting from a variety of difficulties experienced by suppliers based in or near the impacted area surrounding the Gulf Coast,” says Brian Ruttencutter, president and chief executive officer of ABC Window Co.

Lesson To Be Learned
What can be taken away from the tragedy of Katrina?

“It showed us that impact-resistant products are needed to keep out air and water, and all the special products have been installed have been necessary,” says Karr.

“Specifically in the window manufacturing industry, we believe that Katrina has reminded all of us that it is important to deal with a company that has a product offering able to meet specific weather conditions anticipated in the region,” says Ruttencutter. “...We believe it is more important today than ever before - in the wake of Katrina - that all of our products meet or exceed all AAMA standards for this region.”

Flood surges have also played a powerful role.

“It is important to understand the tragic loss of life resulted more from storm surge and flooding. The majority of research and development will revolve around flood management,” says Olmstead.

Others see the damage left in Katrina’s wake as a reinforcement of the effectiveness of impact-resistant products.

“In the public eye, it will bring more recognition that these products are needed. In the past, it seemed like people skated over code. It will also cause more window companies to look into the possibility of manufacturing impact-resistant products.”

It looks like we will see the results of how Katrina affected the door and window manufacturing industry in six to 12 months when the rebuilding comes.

“There will be lots of opportunity. It will be interesting to see how reconstruction is handled. How much the government is going to step in and create more economical housing will have a big implication of types of products used,” says Karr.

“Katrina reinforces our decision to enter the impact-resistant products market. It shows that unfortunately, there will be opportunities in this realm, and thankfully we will be able to help,” says Karr.

“We can expect water infiltration around doors and windows to surface as a major concern. There will also be much discussion of glazing failures that resulted from wind load alone, particularly in the high-rise buildings. There will likely be building code changes regarding testing and engineering affecting the industry,” says Olmstead.

Tough Building Codes for Gulf States May Be Forthcoming
One possible reason Louisiana and Mississippi endured such extreme damage during this hurricane could be the fact that states do not have building codes that are as stringent as other hurricane-prone areas.

“Those states don’t have the same codes as Florida,” said Max Perilstein of Arch Aluminum and Glass. “Places in Florida that were struck during last year’s hurricane season, which had hurricane-resistant products, held up well. Mississippi and Louisiana don’t follow those same codes.”

Mike Fischer, code consultant for the Window and Door Manufacturers Association (WDMA), agreed.

“There is a huge difference in the building codes,” he said. “There’s not even a comparison.” He explained that Florida has been the leader in hurricane codes, followed by Texas and the Carolinas.

“Part of the reason [for the complacency by Louisiana and Mississippi] is because they have not had a direct hit in years,” said Fischer.

As a result of Hurricane Katrina, Fischer said Louisiana, Mississippi and Alabama are all likely to re-evaluate their building codes.

“Ironically, there was supposed to have been a meeting on August 31 for the State of Louisiana to look at its code requirements, as they are in the process of re-evaluating them.”

The meeting, of course, was postponed due to Katrina.

Much in the way Hurricane Andrew changed Florida and its codes, in all likeliness, Katrina will have a similar impact on the Gulf States.

“Yes, we’ll see a change in the codes there,” said Fischer. “Part of the process will be an evaluation of building performance, either at the state level or by the Federal Emergency Management Agency (FEMA). There will also be industry involvement, as well.”

Fischer, along with representatives from other building product industries, as part of the Institute for Building and Home Safety, traveled to the hurricane sites in mid-September.

The American Architectural Manufacturers Association (AAMA) is playing a role as well. In fact, AAMA's Southeast region is planning to hold its spring meeting in the panhandle of Florida because it is close enough to the regions affected, according to Janice Charletta, marketing and membership for AAMA. The association scheduled it there so professionals and code officials can attend and discuss products to be included in the rebuilding process.

“Our Southeast region will be actively seeking out code officials to see what we can do to provide input and make sure the building code is where it needs to be,” she said. “As a result of Katrina, we will likely see a lot more discussion of impact-resistant products, the requirements for them and why they are important.”

“We look at this as a tragedy, but also the opportunity for the industry to rebuild in that region at a higher standard,” added Charletta.

Only time will tell what that higher standard might be.

Sarah Batcheler is an assistant editor for DWM.

Lending a Helping Hand
Manufacturers from all over the country have responded to the disaster in various ways, but with the same intention to lend a helping hand to the victims of Hurricane Katrina. The Door Hardware Institute (DHI), ViWinTech and Kolbe and Kolbe were some of the first organizations to respond.

Vinyl Window Technologies, or ViWinTech, of Paducah, Kentucky, loaded up one of its 53-foot tractor trailers and donated a driver to deliver much needed goods to survivors and responders in Jackson, Miss. The six-hour, 400-mile trip resulted in the donation of a truckload of 300 health kits including toiletry items, flood buckets with cleaning supplies, water, clothes and Bibles.

The company is partnering with United Methodist Churches in the Paducah District on this effort. Volunteers from the United Methodist Churches and ViWinTech employees gathered nearly $7,000 worth of supplies. On Tuesday, September 13, the driver began the journey to Jackson where the supplies were distributed through the United Methodist District in that community.

Three local school districts have teamed up with Kolbe and Kolbe Millwork in Wausau, Wis., to collect much-needed items for the victims of the storm.

On September 12, company employees spent the day packing all those donations into a semi-truck. Hundreds of boxes were filled with canned goods, clothing, bedding and baby items to be delivered to victims of the disaster.

“It wasn’t a matter of if we were gonna do it, it was how,” says Ann Micholic, the human resources director.

Employees teamed up with the Wausau and DC Everest School Districts, and the Wausau Area Catholic Schools, to collect these items for the Katrina victims.

In addition to the school donations, Kolbe also took bedding, blankets and toiletries collected from local hotels, and money collected from Kolbe employees. The Kolbe truck left for Alabama on September 13, and arrived in Mobile on September 15.

The Door and Hardware Institute (DHI) gathered donations for the American Red Cross Disaster Relief fund and will present all donations with the industry’s donations to the Disaster Relief fund.

Impact on Building Materials and Prices
The full extent of the impact of Hurricane Katrina on the overall economy and on the housing market is still unclear, but the number of homes destroyed by this catastrophe is almost certain to dwarf the losses from any previous United States natural disaster, according to economists for the National Association of Home Builders (NAHB). Past experience, together with the visible devastation, provides some basis for projecting the effects on construction activity, the supply and cost of building materials and construction labor, and other implications for the housing market.

The number of housing units destroyed (made uninhabitable and beyond economically-justified repair) by Hurricane Andrew in 1992 was estimated at more than 28,000. The combined effect of Hurricanes Jeanne, Ivan, Frances, and Charley in 2004 was almost as large, with nearly 27,500 housing units destroyed, according to estimates compiled by the American Red Cross. In those cases, most of the destruction was caused by winds or the immediate force of the storm surge. The number of homes with major but repairable damage was more than twice the number destroyed.

Katrina also caused widespread immediate damage in Louisiana, Mississippi, and Alabama, but the flooding in New Orleans, Mobile, and elsewhere is likely to translate into much larger numbers of homes destroyed.

Of necessity, rebuilding will have to wait. The immediate need will be to clean up and repair damage to structures that are still viable. The repair process will absorb much of the construction labor near the affected area and several key materials that would otherwise have been used to build new homes, according to the economists. The materials that will be most affected include roofing and wood panels (plywood and OSB).

The NAHB economists predict that the storm will have impacts on the supply of materials as well as demand. The areas affected by the storm have a significant number of wood product facilities that may have been damaged or destroyed. On the other hand, trees that have been blown down will need to be harvested on an accelerated basis, perhaps helping to lower wood product prices in the medium term.
From July 1992 to September 1992, largely as a consequence of Hurricane Andrew, the average price for plywood increased from about $222 per 1,000 square feet to $321, and the price of Southern pine framing lumber rose from $264 per 1,000 board feet to $308. The hurricanes in 2004 did not trigger a similar increase, and prices actually fell during the relevant period, after soaring during the preceding year. The combination of greater (partly speculative) demand and disrupted supply produced a spike in lumber and panel prices in the final days of August 2005. With production already running at full capacity for wood panels, further increases for those products are likely.

Although the loss of tens of thousands of homes implies increased demand for, and construction of, new homes, past experience has shown that there is no massive surge in home building in affected areas. Replacing units destroyed by the storm will not begin for many months and will take place slowly, over a number of years.