U.S. geosynthetic market awaits important legislative decisions
By Jeffrey Rasmussen
While U.S. geosynthetics suppliers and distributors assess 2009’s lackluster performance, they can also look forward to the possibility of meaningful improvements before the end of this year. Sales in 2009 were down about 4–5 percent, but 1.5–2.0 percent growth is expected in 2010.
The decrease in sales and profit margins for U.S. geosynthetic suppliers and distributors in 2009 was due primarily to the lack of publicly funded projects, state budget deficits, and the tight credit and lending market. The significant downturn in the economy has been the driving force behind tight credit conditions, and a widespread lack of publicly funded projects across the United States. Because of these issues, contractors and state transportation departments are expected to be cautious in hiring and spending decisions while they wait for Congress to pass a new federal surface transportation bill, which might happen in the fall of 2010. Overall, the value of highway, street and bridge construction in 2009 was about $84.8 billion, up 3.6 percent from 2008. It is expected to reach about $90.5 billion in 2010, up about 7 percent over 2009.
Uncertainty over the reauthorization of the multi-year federal resurface transportation bill and future growth of the overall U.S. economy—and the availability of stimulus funds—will determine if the U.S. geosynthetic market materializes into a growth year for many U.S. geosynthetic suppliers and distributors in 2010. To date, more than 77 percent of approximately $50 billion dollars in stimulus funds has been committed to road, street and bridge construction projects, but only 4 billion, or 16 percent of the total funding available, has been paid to contractors. So, there is a lot of unfinished work to be completed in 2010. This should bode well for improving the sales and profit margin prospects for U.S. geosynthetic suppliers and distributors.
A brief history
Geosynthetics is the term used to describe a range of generally polymeric products used to solve civil engineering problems. The term encompasses eight main product categories: geotextiles, geogrids, geonets, geomembranes, geosynthetic clay liners, geofoam, geocells (cellular confinement) and geocomposites. The polymeric nature of the products makes them suitable for use in the ground where high levels of durability are required. Properly formulated, however, they can also be used in exposed applications.
Geosynthetics are available in a wide range of forms and materials, each to suit a slightly different end use. These products have a wide range of applications and are currently used in many civil, geotechnical, transportation, geoenvironmental, hydraulic, and private development applications including roads, airfields, railroads, embankments, retaining structures, reservoirs, canals, dams, erosion control, sediment control, landfill liners, landfill covers, mining, aquaculture and agriculture.
Historically, roads and bridges were stablized with natural materials: timbers, fabrics or vegetation mixed with soil. The problem with natural materials is the biodegradation that occurs from microorganisms in the soil. With the advent of polymers in the middle of the 20th century, a much more stable material became available. When properly formulated, lifetimes measured in centuries can be predicted, even for harsh environmental conditions.
The use of geosynthetics has expanded rapidly into nearly all areas of civil, geotechnical, environmental, coastal and hydraulic construction. Many durable polymers (plastics) common to everyday life are found in geosynthetics. The most common are polyolefins and polyester, although rubber, fiberglass and natural materials are sometimes used; however, more than 90 percent of geosynthetics are made of polypropylene.
Since their introduction in the late 1960s, geosynthetics have proven to be versatile and cost-effective ground modification materials. Geosynthetics also have become essential elements as barriers in environmental and hydraulic applications. There are more than 40 manufacturers of geosynthetics that provide products for the North American marketplace—more than half located in the southeastern U.S. or Texas. The industry provides about 12,000 jobs in the U.S. in manufacturing, fabrication, distribution and installation.
A competitive climate
Results from an ATA geosynthetic supplier and distributor climate survey in February 2010 showed a very competitive environment for geosynthetic suppliers and distributors in 2009, driven largely by the reduced expenditures and budgets in state and local governments, a continued slow economy and market growth, and higher raw material and energy prices.
Trends and their impact on the 2009 U.S. geosynthetic market, as cited by suppliers and distributors in ATA’s geosynthetic climate survey, show a range of difficult challenges. Increased competition pushed prices lower by as much as 5–10 percent, resulting in thinner profit margins. With the market shrinking and industry consolidation there were market opportunities for some, but others reduced their operations and became more focused, or closed their doors altogether.
With less money being spent on infrastructure and roads, there were fewer projects, and sales dropped by as much as 40 percent. High raw material prices further reduced sales and profit margins. With customers, too, experiencing tight cash positions, they were reducing inventory and looking for faster turnaround times on orders.
An improved outlook
2009 was a trying time, but suppliers and distributors are optimistic that 2010 will yield better results for geosynthetic businesses. Results in 2009 from ATA’s geosynthetic supplier and distributor climate survey show that 77 percent reported unfavorable sales growth, 53 percent kept their employee head count the same; 18 percent decreased their head count by 1–5 percent, and 18 percent had decreased their head count by more than 5 percent. However, 56 percent reported that they expect favorable sales in 2010; only 18 percent reported that they expect unfavorable sales in 2010.
In the survey, geosynthetic suppliers and distributors cited three main investments they made in 2009 to help them fuel growth and overcome industry challenges. New product introductions led the way with a 16 percent share of investments made; marketing and sales promotion was the second highest investment at 13 percent share; the third highest investment, with an 11 percent share, was improving manufacturing processes.
Looking ahead, geosynthetic suppliers and distributors are hoping for a boost in sales from the injection of funds by the U.S. government’s stimulus program. In fact, the increase in infrastructure development in 2010 is expected to be the largest investment for repairing the U.S. road and bridge infrastructure since the federal highway system in the 1950s.
With the infusion of government funds in infrastructure development, geosynthetic suppliers and distributors need to continue their commitment to educating key market influencers, such as civil engineers who specify the raw materials used for building roads, bridges and other civil engineering projects. A united effort on this front will help to expand the number and scope of geosynthetic projects in the future.
