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Metal roofs stay above the rest of construction market

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With the economy still seeking a jumpstart from one of the worst recessions on record, consumers are looking for more bang for their buck-and might just find it with metal roofing.

The economic downturn has battered the construction market, but the metal roofing industry continues to enjoy growth and capture more of the overall roofing market, according to industry players.

An estimated 6 million households are in the market for a replacement roof each year, and metal has become a popular choice for its ability to outlast the traditional shingle roof.

Market players agree that demand for metal roofs has grown. "It will continue to capture market share as people continue to look for value for their dollar," said Dick Bus, president of Allentown, Pa.-based manufacturer Atas International Inc., and a past president of the Metal Construction Association, Glenview, Ill.

Demand for replacement roofs has maintained its health, a southern manufacturer agreed. "Residential replacement roofs appear to be as good as they were or better," Bernie Reed, president of Reed's Metals Inc., Brookhaven, Miss., said. "We manufacture way more replacement roofs right now, but simply for the fact that new construction is down. Reed's Metals is a regional producer whose Brookhaven manufacturing plant serves the Alabama, Louisiana, Mississippi and Tennessee markets.

Unlike steel-framed homes, which represent less than 2 percent of residential construction and have been struggling to gain market share, homeowners are more open to switching from a traditional roof to a steel roof. "Sure they are more costly, but look at the longevity-you get a 40-year warranty on the paint and the roof lasts for 50 to 75 years," Reed said.

Like other manufacturers, Atas, which has six plants in Arizona, Pennsylvania and Tennessee, recognizes the importance of the residential market, pointing out that the recession has actually increased demand for metal roofs. "About 80 percent of all roofing in the market is replacement and it is coming back now. People who had put off replacing their roofs have decided not to move to a different home. There is now a new mentality where, instead of moving, homeowners say 'I am going to improve what I have'," Bus said. "And there is value. People are realizing that metal does last a long time and they won't have to replace their roof again in 15 to 20 years. And they can choose a new roof that looks like shingles."

Market share in areas that are prone to wildfires, hurricanes and hailstorms continues to grow. "The uses are much more concentrated in these areas," Lorenco Goncalves, chairman, president and chief executive officer of Metals USA Holding Corp., said. "Our biggest market is California. When there is a wildfire, the houses that are able to resist have metal roofs. Coastal states that are subject to hurricanes prefer metal roofs, and our third big market is Colorado and Texas, which are subject to hailstorms.

The Fort Lauderdale, Fla.-based service center owns metal roofing producers Gerard Roofing Technologies and Allmet Roofing Products. It exports about 20 percent of the metal roofs it manufactures at its U.S. and Canadian facilities to Asia, South America and Africa.

The commercial sector appears to be nearing the bottom, according to Wayne Dickinson, president and chief executive officer of Houston-based NCI Group Inc.'s components division, which is heavily weighted toward heavy industrial and commercial roofs.

Dickinson has a perspective that covers multiple markets, including residential, agricultural, architectural, industrial and commercial. "We have noticed that the residential and agricultural markets have maintained steadier volume levels, while the commercial sector has produced the sharpest decline since the recent economic downturn began," he said. "But we believe that drop is nearing the bottom and a recovery is around the corner."

NCI has been positioning itself to capitalize on the next uptick, including opening a Jackson, Miss., plant that will manufacture insulated metal panels for both roofs and walls, meeting many of the energy performance standards currently being adopted across the country.

"The last two years have been tough on everyone," Dickinson said. " Not only have we faced challenges brought on by fluctuating steel prices and inventory levels, compounded by reduced demand, the market itself is evolving as building owners are more concerned with lifetime performance and costs. The adjustment can be good for us since our products meet many of the most demanding performance requirements and have some of the best lifetime values of any product currently available. Today we are noticing an increase in quoting activity. Although not as many people are buying as in years past, we believe that this increased activity is an indication of a need, and as confidence and lending practices improve we believe we will start to see a steady upward trend."

Projections are for 660 million square feet to be built this year in the nonresidential construction market, down from 1.7 billion square feet in 2007, he said. "These are the lowest construction levels in the last 50 years. By comparison, vacancy rates today are similar to 2003, yet 2003 construction levels were at 1.4 billion square feet, well above what we are seeing today, and they continued to increase until the current dropoff hit in 2008. We feel that the dropoff in new construction is in large part a function of continued regional bank lending limitations. There are other factors at play here, but a recovery is not an unreasonable expectation."

Goncalves thinks that residential construction might have hit bottom. "I am seeing a reversing in the trend and, until we had the housing debacle, I was starting to see a transition to a more normal environment. But even during the downturn, our roofs were doing well," he said.

The Metal Roof Alliance, a Belfair, Wash.-based consortium of metal roofing manufacturers, suppliers, distributors and contractors, estimates that metal roofing use is down just three-quarters of a percent this year, although Bus disagrees. "I am not really convinced we lost market share because the number of reroofs we are doing is up. And the data is so fragmented that it is hard to wrap your arms around those numbers," he said.

While the trade group believes metal roofing has a 9-percent share of the overall roofing industry, Bus pegs it at closer to 12 percent.

"But things could be better. Have we seen a slowdown in reroofing? No, but there has most definitely been a slowdown in the commercial side of the business," Bus said, noting that while nonresidential construction has been in the doldrums, some of the commercial markets aren't completely dead. "On the institutional side, we are doing work for schools and office buildings and some government buildings." However, "when you are talking commercial, I don't see that coming back until 2012 or 2013."

Aside from replacement roofs, agricultural demand has been another area that has been holding its own, Reed said, noting that he supplies to a lot of chicken farms. "But overall demand just isn't that good, and a lot of it has to do with the economy. New construction is down and I don't see it coming back soon. I don't even have my hopes up for next year. I think the recovery is still way out there," he said.

Across the board, manufacturers' lead times are extremely short. Buyers can pick up their product the same day or have it delivered within 72 hours.

The manufacturers, who primarily use Galvalume and G90 galvanized steel, buy huge volumes of domestic metal and find hedging steel buys precarious in the volatile market.

Reed follows steel prices closely and buys a combination of domestic and imported Galvalume. "We try to watch for the market bottom and buy in bulk to hedge against the market," he said.

"It is really tough," Dickinson said. "The last two years have been a roller coaster ride. We are in constant contact with purchasing agents and suppliers. We could use some stabilizing in prices for a while."

"I do some hedge buying but I follow my instinct, as I have been at this long enough," Bus said. "But I don't have a magic formula in my buying pattern."

Goncalves said that his company's volume buying helps manage pricing volatility. "Being an important customer at the mill has enabled us to have a partnership with them," he said. LISA GORDON


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