Volume 37, Issue 12, December 2002

Industry Astrology 
Glass and Metal Representatives 
Forecast What 2003 Holds in Store

It’s hard to believe another year is almost here. Looking ahead, you may be wondering what to expect from the construction industry’s glass and metal segments. While no one can predict what the future holds for the industry, several industry representatives have offered their “horoscopes” of what we can possibly expect from segments for the coming year.

Representing the float glass segment is Fred Wallin, vice president of marketing and business development for AFG Industries of Kingsport, Tenn., and Russ Ebeid, president of Auburn Hills, Mich.-based Guardian Industries’ glass group. 

Offering predictions from the metal side is Bob Leyland, vice president of sales and marketing for Norcross, Ga.-based Kawneer Co. Inc. and Kyle Jones, national sales manager with Vistawall of Terrell, Texas.

To find out what fabricators are forecasting for 2003, see the sidebar below.

Fabricator Forecast
With industry expectations from the glass and metal segment in mind, it’s also important to take a look at what we can expect from the fabricators in 2003. 

Considering such 2002 factors as the economic slowdown, threat of war and corporate governance, Mark Burke, president and chief executive officer for Vitro America, said the industry saw a decline in commercial construction activity. 

“Looking ahead to 2003, we are projecting the commercial construction market to be level with or down slightly from 2002, depending on the timing and general economic activity,” said Burke.
In terms of sales expectations, some fabricators are without high hopes. According to Arthur Berkowitz, president of JE Berkowitz LP, 2003 sales will most likely show no growth compared to 2002. “Of course, 2002 was significantly down in demand and sales compared to 2001,” he said.

Don Pyatt, president of Viracon, has a similar outlook for sales in 2003. “We had previously expected to see positive news in the construction markets, and we have not yet seen that,” he said. “We expect the market to soften, but not show signs of improvement.” 

Echoing the concerns of manufacturers, fabricators also see the high vacancy rates of office buildings a factor that will affect growth areas in 2003.

“Schools, public and institutional work seem to be areas of optimism,” said Berkowitz. “But private work, particularly office buildings, remains extremely pessimistic in light of significant vacancy rates.”

“A big concern is the market for office space,” added Pyatt. “With vacancy rates jumping, the outlook is disappointing. But on the positive side, our hurricane [resistant] business and other protective glazings are improving quite nicely,” he said.

However, despite the concerns fabricators are facing, some are quite optimistic about what to expect next year.

“In talking with our customers in commercial construction and considering our own commercial construction activity, there appears to be ample capacity to quickly benefit from the economic recovery,” said Burke. “I believe that historically low interest rates will prompt those who have delayed commercial construction projects to act promptly, at the first sign of recovery, to avoid the cost of higher interest rates that a recovery will inevitably generate.” 

Considering ongoing areas of concern for fabricators, such as price increases and energy surcharges, what are some of the major challenges the segment expects to face in 2003?

“With weak demand, we feel the big challenge will be on pricing. We see a lot of pressure there,” said Pyatt. “And until the construction outlook improves we’ll feel the impact there.”

“Our challenge is to hang in there and hope for some economic recovery in 2004 and a return to increased product demand,” said Berkowitz. “While also continuing to invest in maintaining and improving our equipment, facilities and most of all, our staff, through training and ISO quality standards. It’s a juggling act, but I am confident we are up to the challenge.” 

Top Ten MSA’s for Office Building
Square Feet in 2002 – First Nine Months
(Ranked by volume of new construction)

1. Washington, D.C. +15%
2. Atlanta -38%
3. New York -33%
4. Phoenix -50%
5. Tampa, Fla. +111%
6. Dallas -50%
7. Philadelphia -27%
8. Chicago -54%
9. Los Angeles -61%
10. Houston -61%
11.Seattle -50%
25.Boston -79%
42.San Jose, Calif. -84%
135.San Francisco -97%

What kind of product demand are you foreseeing for 2003?

Wallin: We see continued highs in residential and all products related to new construction and remodeling. The weakest segment will be the commercial construction market where there is a national vacancy rate of 16 percent in office space. We are forecasting 2003’s commercial market to be down 1 percent in square footage and up 1 percent in contract value. The glass industry will have a weak year on the architectural side. A brighter spot is schools, hospitals and casinos. There are still lots of opportunities, so overall we are optimistic since the majority of our customers will enjoy strong demand.

Ebeid: With low interest rates continuing, I would say that would sustain purchases of products that use lots of glass, namely autos and houses. Demand for glass products in the United States. should be similar to this year. I don’t see any shortages, but neither a glut of products either. We will see a shift in manufacturers making different substrates and colors in 2003. For example, some companies will be making more auto glass and less architectural glass and vice versa. So while overall supply and demand will be consistent with this year, production will be slightly different, and this may affect from whom the customer buys.

Leyland: We expect that the market will be extremely tight and that we will perhaps see a decline from 2002 levels in the 3- to 5-percent range. The institutional and remodel markets, particularly schools and universities, continue to be the strongest in terms of opportunity. We anticipate that retail and office buildings will continue to be soft. Uncertainties among investors, increasing unemployment figures and corporate downsizing that results in vacant office space are all affecting commercial construction.

Jones: Most market indicators are projecting a flat year in 2003, much like the levels of 2002.


What kind of product usage expectations do you foresee?

Wallin: Overall, three quarters of the market is going to be strong, successful and will grow, and that’s going to be the residential, automotive and specialty (glasses). It will be off a little architecturally. Overall, demand is expected to be up about .5 percent, and the industry is straining at capacity.

Ebeid: Coated products will continue to rise significantly. Mirror, for example, now has a corrosion-resistant coating that prevents it from getting black spots. So it’s an old industry that’s been re-born. Low-E will continue to increase; laminated glass will continue to increase. I see a continued increase in the various value-added products; an array of new products as well as a continuation of old products reconfigured.

Leyland: Due to the continued strength of the institutional market, Kawneer sees some growth opportunities with windows. We also anticipate continuing demand for entrances, framing systems and wall system product lines similar to 2002.

Jones: We expect each of our product lines to continue to expand their market share in their respected markets.

What are the growth areas you foresee for next year?

Wallin: The biggest area will be low-E glass, particularly solar-control low-E. Code changes and encouraging energy savings in Florida and Georgia will drive demand in the Southeast, and last year’s code changes in California and Texas will continue to increase market penetration. We forecast it to grow 12-14 percent.

Ebeid: I see a proliferation of value-added products, mostly coated. It isn’t just clear glass any more. I can envision someday there being a coating on all four sides of an insulating unit. Maybe on surface one there would be Rain-ban [low-maintenance glass], maybe on surface two a low-E, on surface three there could be a UV coating and on surface four maybe a Diamond Guard scratch-resistant glass.

Jones: The strong education market continues to provide growth opportunities for our window and storefront product lines.

What are you telling your customers to plan for?

Wallin: What we provide to our customers at year-end is an economic and market forecast to help them in planning. We also present it to industry groups and customers who ask for it. We try to share as much information as we can to assist them. The economy continues to be fragile … but we are cautiously optimistic. Major glass markets seem to be reasonably solid—remodeling is projected to grow another 6 percent, and that’s terrific for everyone. Natural gas costs continue to be a problem and prices are high, but not as bad as two years ago. I think with a Republican Senate and additional Republican House votes, drilling will be increased. It should help increase supply and reduce costs for everyone.

Ebeid: The old business model of buying in bulk at a low price and selling it at a high price won’t work anymore. [The industry’s] mindset has got to become less technical and more consumer-oriented.

Leyland: We recommend being realistic and fully aware of both local and national business conditions and sizing business appropriately. Keeping in touch with issues that impact national, state and local economies is vital. For example, the Republican control of the Senate and changes in political control closer to home, possible war with Iraq and the threat of terrorism at home and abroad. 

Strengthening relationships and building reputations with customers is more vital than ever in a slow economy and going the extra mile to ensure a positive partnership will separate winners in a slow economy. Service and quality, reliability and consistency should be the prime focus in tough times of fiercer-than-ever competition.

Since we anticipate thin market conditions, we suggest building a backlog. It is important to secure projects that will carry you through 2003. 

Jones: Plan for another tough, price-sensitive year.

What capacity are you running at?

Wallin: When you take net capacity, including rebuilds, somewhere as an industry we are at about 95-97 percent and that means there is not a lot of extra glass. Service will suffer. Demand is strong and inventories are low, so this will be an awkward year.

Ebeid: We are running at maximum capacity.

Leyland: We anticipate having ample capacity in all its operations with the ability to supply product and fill whatever needs our customers have throughout the coming year. We have been building inventories to support those needs so that we can provide prompt, efficient service. Our 16 service centers located throughout the United States are ready to rapidly meet customer requirements.

Jones: We currently have available “press” capacity and are adding “custom door” capacity.

What kind of concerns do you have for your products in 2003?

Wallin: With strong markets and glass demand, I don’t see disinflation as an issue, but we still have the threat of double-dip inflation. With an estimated 17.6 million housing units to meet the demand of our growing population this decade, all glass products for windows, doors, tub enclosures, mirrors and furniture should enjoy solid—if somewhat slow—growth.

Ebeid: Changing our mindset and that of customers by leading them into the future. I am [not] taking for granted the value of new innovations, but am more concerned about how it is marketed and sold.

Leyland: In view of the currently soft market and uncertain times, significant events that would cause further market erosion would be a cause for concern. 

We believe that the building industry should continue to promote aluminum as an environmentally friendly product that can be recycled and thermally enhanced, and is flexible enough to provide whatever aesthetics are selected by architects and designers. Recent challenges to the use of aluminum in buildings have raised questions to which responses and information should be readily 

Jones: There continues to be a severe misunderstanding in the architectural community regarding finish warranties. Due to this misunderstanding, many owners are being misled in the type of warranty they are receiving and are paying a premium.


What are some product trends you expect?

Wallin: The glass industry as a whole is developing more technically advanced products to control energy and convey technologies. The industry is responding well to architectural requirements and the needs of the building owners and is working well to provide energy-efficient solutions. I’m excited that we are contributing to our national energy savings, supporting our customers and 
growing our business. This will be a decade of transition as we continue our move from bulk commodities to providers of customer- and market-based value-added solutions by reducing costs, cycle time, improving quality and conveying new and exciting technologies on glass. 

Ebeid: Value-added products. We’re into a re-birth of this stogy industry. We see this industry like the proverbial Phoenix who is getting a new life. This industry is embarking on an irreversible journey and not just a one-year trend.

Leyland: The increase in institutional, remodel and retrofit projects is leading to requirements for fewer stock items and more fabricated and custom work in curtainwall and window projects.

We are seeing more and more applications for bomb-blast-resistant products and this is particularly true in government facility projects, but also in office-building applications. Along the same lines, concerns about security have been raised with the associated need to develop more security-based product lines such as egress controls and card readers. 

Accommodating weather-born events, demand is increasing for hurricane-impact-resistant product lines with high thermal performance. As a result, manufacturers have raised the bar on product designs that are impact-resistant and thermally efficient.

The trend toward pre-glazed or unitized products compared to stick-built applications assembled on-site continues. These products have the advantage of controlled production conditions and are frequently more cost-effective than those built on the job site. 

Jones: Blast-resistant products are frequently being seen in governmental specifications. Impact products continue to expand along the Atlantic and Gulf coastlines. 


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