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October  2004

In the News


Study Offers New Perspective on Retailers
The 2003 Window and Door Distribution Channel Study, conducted by the Ducker Research Co., takes a look at the true impact of the big box retailers versus traditional distribution channels and offers a wealth of statistical information on the industry. The study, jointly sponsored by the Window & Door Manufacturers Association (WDMA) and the American Architectural Manufacturers Association (AAMA), reveals trends in the residential distribution channels, which are broken down into six categories, including that of the big box retailer. 

Perhaps the most revealing findings are those dealing with big box chains, which were previously grouped with traditional hardware retail chains and lumberyards. Using the new channel definitions that set the big box retailer apart, Ducker researchers re-evaluated data from the 2001 survey, so that direct correlation could be made with the updated 2003 market data. 

“After reviewing the statistics on window and door volume flowing through the big box channel—and segregating that group from lumberyards with traditional hardware departments—it appears that window sales through the big box retailer may be leveling out,” said Richard Walker, executive vice president for AAMA. 
“In terms of numbers, the big box market share was 16 percent in 2001, and the same in the 
2003 study. If the trend continues, window numbers in our 2006 study may actually decline 
by a percentage point,” Walker noted. 

For the first time, the study takes a much more detailed look at the door category, segmenting residential entry doors from residential interior doors, thus highlighting the differences in distribution channel flow for these two 
products. 

“It was found, for example, that 52 percent of entry door sales by big box retailers are made to remodeling contractors, while the balance of total entry door sales are split almost evenly between the builder and the homeowner,” Walker added. “Sales for interior doors do not parallel these percentages.” 
According to the study, the window market sales reached 66.70 million units for 2003, 
while patio doors, entry doors and interior and passage doors comprise an estimated 79.04 million units. 

“Strong housing starts have led to increased sales of windows and door products in the residential new construction market. Coupled with a robust remodeling market, overall growth surpassed predictions,” Walker said. However, he noted that current market conditions are not likely to hold through 2006.

The full four-part Ducker Research study is available on CD through AAMA and WDMA. AAMA offers the report in three national segments and in 11 reports divided by regions as follows:
• AAMA/WDMA U.S. Market Size Report
• Channel Distribution Report
• National Statistical Review and Forecast
• Regional Statistical Review and Forecast (available individually by 11 regions).

For members, AAMA offers the four-part study for $330 per copy, and for non-members, it is $3,300 per copy. Both AAMA and the WDMA offer parts of the study for less cost. 
Info+circle card #197.

WTO Rejects U.S. Lumber Tariff
The World Trade Organization (WTO) has upheld a ruling that supported steep anti-dumping tariffs imposed by the United States on imports of Canadian softwood lumber, but maintained that U.S. authorities miscalculated the amounts, according to the Associated Press.

Canada and the United States had both appealed the earlier decision by a WTO panel, but a 63-page final ruling rejected challenges by both countries. 

A panel of three trade experts rejected claims by the Canadian government that the United States had acted illegally in investigating whether lumber from Canada was being sold at prices below the cost of production—a practice known as dumping. 

Rejecting the U.S. appeal, the panel also upheld an earlier ruling that the U.S. government’s calculations were wrong because Washington used a method called “zeroing,” in which sales at above-market prices are ignored. 
The panel said the WTO should order the U.S. government to change its calculation methods to conform with WTO rules. The U.S. will have to recalculate the level of the duties. It was unclear what the new figure 
would be. 

AMD Members Can Help Hurricane Victims
Many members of the Association of Millwork Distributors (AMD) have called the office in New Port Richey, Fla., asking how AMD staff weathered Hurricane Charley, on August 13th as it swept across Florida. As reported on August 27, the hurricane killed 27 people and estimated $7.4 billion in insured damage to homes, businesses and personal possessions.

“Thank you to the AMD members that have inquired how they too can help to rebuild the lives of a person who lost their homes and in many cases their businesses or place of employment because of Hurricane Charley,” said Rosalie Leone, executive director of AMD.

According to Leone, eight counties were directly affected by Charley—Charlotte, DeSoto, Hardee, Highlands, Orange, Osceola, Polk and Seminole. It’s been reported that Charley destroyed more than 12,000 homes and 19,000 other major incidents of damage have been reported.

Charley was ranked as the second most costly hurricane in U.S. history, surpassed only by Hurricane Andrew which reportedly caused $15.5 billion in insured losses in 1992. 

Leone said there are several ways to respond in helping the hurricane victims. 

Taxable donations can be made payable directly to: Hurricane Charley Relief Fund, Volunteer Florida Foundation, 401 S. Monroe St., Tallahassee, FL 32301 or by calling 800/825-3786.

You can send in your donation to The American Red Cross, P.O. Box 97089, Washington, D.C. 97089 or by calling 800/HELP-NOW. In addition, the Salvation Army, which can be reached at 800/SAL-ARMY, offers opportunities for companies and individuals to give monetary donations.

“Many AMD members have offered to donate millwork products but are unsure as to how to make their donations,” Leone said.

After careful research and contact with the Federal Emergency Management Agency (FEMA), Leone said that the AMD has found two organizations that are directly involved in the long-term process of the actual re-building of Florida’s communities. 

Leone asks that AMD members take a minute to check out these organizations’ websites to learn how you may contribute your taxable donations to individuals who are the victims of Hurricane Charley.

The Florida Interfaith Networking in Disaster (FIND) is a network comprised of faith based organizations, state, local and national recovery groups, as well as other community-minded volunteers working in areas that help to prepare, respond and network disaster relief efforts.

Contact them at www.findflorida.org or 866/286-2232.

The Christian Contractors Association (CCA) is an international network of licensed and experienced contractors of all trades as well as caring individual volunteers from all walks of life, donating time, talents and service to provide free life-changing emergency work for all individuals in need, regardless of race, economics or faith.

Contact them at www.christiancontractorsassociation.org or 800/278-7703.

“Thank you for your support of the Association of Millwork Distributors and for your willingness to share your resources with those in need,” Leone said.

Hurricane Expenses Felt by Property Owners 
For homeowners devastated by the hurricanes that passed through Florida—Charley on August 13 and Frances on September 3—rebuilding does not seem guaranteed to provide relief, as prices for insurance and materials skyrocket and developers eye freed land. 

Estimates say that Charley caused $7.4 billion in damage to homes, businesses and personal possessions, making it the second most expensive storm in history after Hurricane Andrew, even before Hurricane Francis added to the damage three weeks later. According to an article from Bloomberg News, the combination of the two destructive storms has made this the costliest year for insurers since 2001, when the Sept. 11 terrorist attacks resulted in $26.5 billion in insurance claims. 

According to an article from AP News, much in how insurers deal with claims has changed in the twelve years since Andrew, the last comparable disaster. Instead of set dollar deductibles, which were standard before Andrew, policies now have deductibles based on a percentage of the insured property, which generally require the insured to pay a larger portion of the damage. On the other hand, insurance companies are now able to address claims more promptly because of satellite-equipped mobile office units set up by insurance companies in hard-hit areas. 

Insurance changes are only the first warning for property owners that rebuilding will not be an inexpensive process. According to an article in the Canadian National Post, a record numbers of housing starts in the U.S. housing industry for the last 18 months have led to high lumber prices that are only expected to climb as rebuilding begins. On the Chicago Mercantile Exchange, September lumber futures delivery were sitting at $442 for 1,000 feet of two-by-fours, the highest in 10 years. 

While areas in Canada and across the U.S. are faced with the increased demand for lumber as a result of Charley, among other problems, Florida faces its own shortages. Florida’s St. Petersburg Times reported that the state was struggling to keep up with a residential boom before the disaster. The resulting shortages of construction workers, plywood, cement and steel, continue to increase the difficulties of reconstruction. In addition, new hurricane codes and elevation restrictions could add to the costs of rebuilding, as well as recent restrictions on density and on the structures permitted at certain flood elevations, according to an article from The News-Press, based in Florida. 

The expense of the rebuilding process has brought another problem to Florida property owners. Real estate developers in some instances have already targeted tracts of land cleared by Charley of mobile home and old houses. Many counties are offering public hearings and special-use permits and exceptions to protect properties, although the exceptions still carry limits. 

TRADE NEWS
Construction Expenditures in China to Grow 
According to a study from The Freedonia Group Inc., a Cleveland-based industrial market research firm, construction expenditures in China will increase 11.2 percent annually though 2008, reaching approximately $454 billion at current official exchange rates. In real (inflation adjusted) terms, spending will grow at a 7.8 percent annual rate. 

Although The Freedonia Group says growth in Chinese construction demand will slow somewhat from the 1998-2003 pace, it adds that the country will continue to outperform other major national construction markets through 2008. Sustained strength in foreign investment funding, additional economic reforms, healthy demand for Chinese manufactured goods and further population and household growth will all work to drive demand for construction in China. 

In particular, non-building construction is predicted to be the fastest growing sector, with expenditures climbing 8.9 percent annually in real terms through 2008. Residential building construction will advance at a 7 percent annual pace, spurred by government efforts to further boost average per-capita living space and private home ownership. In 2003, the nonresidential market accounted for two-fifths of all construction spending in China. 


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