We have recently advertised for an editorial assistant to help us here at Global Gypsum Magazine. We had 10 graduates apply for the job, including two PhDs. One candidate whom I had invited for interview, subsequently called up and told me that she wouldn't be coming after all, since "Gypsum just isn't sexy enough." Are you kidding? It's a multi-billion dollar industry with major international companies innovating as fast as they can, with law suits, mergers and acquisitions and even some espionage now and then. The people are friendly, the product is just about as 'eco' as it gets and there's enough international travel in the job as you could wish for. Needless to say, she didn't get the job.
Managing price expectations
With the rebound in the US economy and its effects on house prices, house building and gypsum wallboard demand, we might anticipate a fast rebound in the price of wallboard as well. Although producers have managed to impose an increase in price of sorts, buyers have started to call 'foul.' "How," they might ask, "can prices increase so sharply when there is still an over-supply of product? Are you producers still fighting for our custom? Is there something 'fishy' going on here?"
The answer is 'not necessarily.' No cartel is required to exist for prices to increase across the industry at more or less the same time. The US wallboard industry is a classic oligopoly1, where a small number of producers control the market. Although there are seven wallboard producers in the US, regionally or locally there are even fewer, since not all operate nationally. In this situation, producers will be able to monitor their competitors very easily through publicly available information (after all, they can just go down to Lowes to check what is being charged for their competitors' products). If your competitors put up prices by 5%, and you have been making losses due to low selling prices since 2008, why wouldn't you match that price increase as well? No cartel required.
I expect, though, that buyers will push back pretty hard against any price increases, until demand matches supply. With real oversupply, it is still a buyers' market, where they can play off one producer against another (especially if they are a big buyer). When demand matches supply, that's when the producers can really dictate terms and make the money that will sustain them through the next slump, whenever it comes along. I'll put a wet finger in the air and make a wild forecast: Starting from 2013, we'll have a strong recovery in the US, which will last for eight years: I think that we will skip the next bust (like 2000 - 2007) on account of pent-up demand from 2008 - 2013. And then, due to hubris and human nature, there will be another bust, for whatever reason. So, I'm predicting the next bust for 2021. Time enough to gather the treasure to survive the lean years. You read it here first.
As for Europe, there has to be a real turnaround from the present situation, which is a hideous 'scraping along the bottom.' Until the start of a strong recovery across Europe (2014? 2015? Further into the future even than that?), all bets (and forecasts) are off. Until then, there can be no realistic expectation of price increases and a return to robust profitability for European wallboard (and insulation) manufacture. We should manage our price and profitability expectations accordingly.
Water: the final frontier
Forget the climate change controversy: Water is becoming headline stuff. The controversy over fracking hinges in part on the fact that millions of litres of water are pumped down each well and around half is left down there: the other half comes back up again and has to be processed and disposed of. At the same time, water stress is becoming more prevalent around the world due to increasing populations, increased water-intensity of agriculture (including growing increasing quantities of meat) and due to shifting climate patterns. Over-abstraction is leading to salt water intrusion of aquifers worldwide. It has long been prophesied that the first war over water will happen soon - but that 'soon' might be sooner than we think. It may already have happened (the 1967 'Six day war' was arguably about water).
We have noticed that other industries are starting to take their water use intensity very seriously. Facilities that once pumped water from wells and discharged waste water into surface catchments are starting to become closed-loop processes. When your neighbours (farmers, householders, other businesses) need the water to survive, and they see you 'wasting' it, they will complain and your 'license to operate' is imperilled.
We expect that many/all facilities in the gypsum wallboard, plaster and insulation industries will sooner or later be optimised for net water consumption. Is that a good thing? In a thirsty world, we won't have the leisure to decide that: we will just be obliged to act.
