Armstrong, IVC US and Mannington on LVT: Industry Barometer
The reason we are seeing announcements about LVT plants being built is because there is presently not enough U.S.-based supply. In fact, I would not be surprised to hear announcements in addition to IVC, Mannington and Armstrong. These three plants alone will not be sufficient to supply close to the North American demand for LVT, which we expect will continue to grow at a rapid pace in the next few years.
No doubt price will be under pressure as supply is added. Being a low-cost producer is going to be paramount, just as it has been in residential sheet vinyl. However, as more supply comes on stream, product features and benefits, styling and quality will be even more important differentiators over and above the significant benefits of shorter lead times and reduced working capital. Distribution will also be a big key.
Paul Murfin is the co-CEO of IVC US. He is a 20 year veteran of the flooring industry and, prior to IVC US, spent time in senior positions with both Armstrong and Beaulieu.
There are many factors that impact market price, but certainly available capacity can have an influence. In this case, there is not strong evidence to indicate that there will be excess capacity, particularly as demand grows. We are not building a plant to drive demand but to service demand.
The supply is entering a growing market, so we are not sure that manufacturing will actually exceed demand. LVT has been experiencing double-digit growth since 2007/2008, and our view is that capacity in the U.S. is growing to keep up. We are not worried about over capacity; we believe demand will continue for the foreseeable future.
What will happen with excess capacity in Asia? Most likely that capacity will be taken up with growth of LVT in China and other parts of the world, including North America. Strides in innovation—continuous flow manufacturing—allow us to manufacture LVT in the U.S. more cost effectively today.
At the end of the day, it comes down to overall value, and we believe beauty, design, innovation and overall service will not lead to price erosion in this industry. The double-digit growth in North America and worldwide is largely because of product performance, appearance and ease-of-installation. By bringing this manufacturing to the U.S., we leverage our manufacturing expertise and create a strong value, quality and service position for a very exciting product category.
Kevin Biedermann is senior vice president of residential flooring at Armstrong Floor Products. He joined Armstrong in 2001. In 2008, he left the company to lead Carlisle Wide Plank Flooring but returned in 2010.
Yes, supply and demand economics tells you that when supply exceeds demand, prices will erode. However, in this situation, there are a few factors to consider.
First, even with the additional domestic capacity, LVT is the fastest growing category in the world, and it will take some time before the industry will reach the point of price erosion. Second, most of the additional capacity is replacement or on-shoring of production. Third, the category continues to innovate with new technologies, and innovation yields differentiation which yields premium pricing. Lastly, raw materials in this category have a history of fluctuating.
Many use the laminate category as an example of a product that has been victimized by commoditization. However, we continue to compete in the laminate category with high-end styling and embossed-in-register technology, and today 80% of our sales come from upper-end products. To that end, we will continue to invest and drive new technology in the LVT category.
David Sheehan is vice president of hard surface at Mannington Commercial. He has been with Mannington for 11 years and in the flooring industry for 18 years.
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