How Much Door, Window and Glass Business
is Going Abroad?
by Michael Collins
It is important to continually monitor the inroads being made into the
domestic market by companies located in other countries. In a relatively
short span of time, the entire $50 billion U.S. furniture industry has
moved to China and other Asian nations. Many of the companies in that
industry segment seemed to be caught unprepared. Within the fenestration
industry, the hardware segment has probably been the one most affected
by overseas competition to date, but virtually every product segment faces
some pressure. Thus, we undertake an annual analysis of the penetration
of non-U.S. manufacturers of doors, windows and glass. The results of
that analysis shed light on the varying degrees to which door and window
companies are losing business to overseas competitors. Figure 1 illustrates
the total dollar amount of doors and windows that were imported into the
U.S. from 2003 to 2011. Imports peaked in 2007, along with the overall
U.S. building products industry. Last year, just more than $1 billion
in doors and windows were imported into this country.
Currently, Canada is the largest exporter of doors and windows into the
United States, with $450 million in door and window sales. However, Chinese
manufacturers are viewed as a much greater competitive threat in the fenestration
industry. The growth rate of their imports into this country, which totaled
$220 million in 2011, are much higher than Canada’s, primarily because
of their advantages in labor and materials costs. Another daunting competitive
aspect of Chinese companies is that, in the commercial segment, they are
able to submit bids that include financing for the builder. By allowing
the builder to borrow the cost of doors and windows until a later stage
or the point of completion of the project, they help alleviate the builder’s
critical need for financing the project. Few domestic companies would
be able to match this benefit.
Figure 2 at
left shows the dollar value of doors and windows imported from China between
2003 and 2011. In Figure 1, we saw that imports dropped by 40 percent
from the end of 2008 to 2011. However, Chinese imports dropped by just
over 30 percent. Thus, Chinese manufacturers gained share at the expense
of all other door and window importing nations. Also, Chinese imports
grew, albeit at a very modest rate, from 2009 to 2011. As may be seen
in Figure 1, total world imports dropped slightly in each of those years.
Historically, doors have represented a much higher percentage than windows
of fenestration imports from China. Doors slabs are easier to ship and
they fill up a shipping container more efficiently. Offering a small handful
of door sizes can allow a company to access a major portion of the door
market. A similarly small selection of window sizes wouldn’t begin to
scratch the surface of that market. There was one year in which this trend
did not hold true, which drew attention to the split between doors and
windows in Chinese imports. From 2003 to 2007, windows averaged roughly
17 percent of total door and window imports from China. In 2008, windows
jumped to nearly 28 percent of Chinese imports. This raised the question
of whether Chinese window manufacturers had discovered ways to overcome
some of the previously discussed disadvantages. However, time has shown
that the import level of windows from China that year must have been an
anomaly or the result of a few large projects. From 2009 to 2011, window
imports from China returned to a more normal average level of 12 percent.
As may be seen in Figure 4, the rate of growth of Chinese door and window
imports far exceeds that of any other country. The
level of Chinese imports in 2011 totaled just more than two times their
2003 levels. The other largest exporters of doors and windows to the U.S.,
Canada, Mexico and Brazil had seen their exports return to their 2003
levels last year.
Glass is a key component in doors and windows, so the growth rate of glass
imports deserves attention. Figure 5 illustrates the fact that glass imports
fell sharply in 2009, coinciding with the trough of the recession. Glass
imports grew 21.5 percent from 2009 through the end of last year. Given
the drop-off in the building products industry over that time period,
it seems likely that foreign glass manufacturers gained share at the expense
of U.S.-based manufacturers. Unfortunately, it is not possible to determine
this relationship precisely. Import statistics include every piece of
flat glass to come through customs, while there is no similarly precise
tally of domestic glass sales. The same may be said of the door and window
statistics presented earlier.
Figure 6 shows Chinese glass imports from 2003 to 2011. Like total world
imports, Chinese glass imports dropped from 2008 to 2009. However, total
world imports dropped 22.5 percent during that time, while imports from
China dropped by only 13.7 percent. Thus, Chinese companies were able
to grab market share in the worst year of the decline. As the market recovered
from 2009 to 2011, Chinese companies have continued to grow share, with
imports increasing 61.7 percent. Total world imports grew by only 21.5
percent over the same period.
The most effective ways to counter overseas competition are to maximize
the advantage of being close to one’s customers by offering a wide product
variety that can be customized in numerous ways and delivered with a short
lead time. Offering nstallation and follow-up service also provide important
advantages. Another key aspect of preparedness for participants in every
industry, though, is to occasionally conduct an analysis such as this
to determine the overall level of success that overseas competitors are
having in penetrating the U.S. market.
Note: The source of all import statistics presented in this article
is the Economic and Statistics Administration of the U.S. Department of
Michael Collins is managing director, building products group,
Jordan Knauff and Co. He specializes in mergers and acquisitions in the
door and window industry.
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