Tariff Tracker: Will Tariffs Wash Away Gutter & Downspout Sales?

The Trump administration’s tariffs on aluminum and steel have drawn a mixed reaction from US producers. With the long-term fate of American aluminum and steel at stake, gutter and downspout products are hardly top of mind.

However, the rainware supply chain is not only a microcosm of larger steel and aluminum supply chains but also representative of many construction industries that rely on the metals, which also include pipe, siding, and roofing.

According to the Freedonia Group’s Gutters & Downspouts in the US, over 70% of gutters and downspouts are made of aluminum, and a much smaller – but still sizeable – 20% are made of steel. With over 90% of its products in the balance, will the rainware industry be a winner or loser in Trump’s trade war?

The Winners: Primary Metal Manufacturers

The basic component of most gutters and downspouts is metal coil, a product manufactured by major primary metal producers like US Steel for a variety of industries.

US primary metal manufacturers stand to benefit the most from the metal tariffs. Citing an expected increase in demand for American-made steel, in June US Steel announced that it is restarting two furnaces at its Granite City, Illinois facility, a move the company says will create 500 new steel jobs.

However, some argue that primary metal producers will only benefit when they have excess capacity that can be restarted easily. US Steel’s Granite City location, for instance, was shut down in 2015 and is still in relatively good condition. Even so, the furnaces will not be ready for use until October. It may be too expensive for other companies with older operations to rev up production, leading to the possibility of supply shortages.

The Losers: Fabricators, Contractors, or Consumers?

Either way, the next link in the rainware supply chain – sectional gutter manufacturers and fabricators that slit and coat the base coil for use by seamless gutter contractors – are likely to face higher material costs.

Steel and aluminum prices have increased substantially in recent months, leading many companies that use the metals – ranging from pipeline builders to automakers – to complain that the tariffs are creating an unreasonable cost burden.

However, sectional product manufacturers and coil fabricators may just pass on cost increases directly to builders and consumers.

As a result, some builders may be discouraged from installing rainware in regions where gutters are less likely to be installed – like the South and West – but new construction accounts for a small portion of overall product demand.

Homeowners make the majority of buying decisions, and they will likely accept higher costs.

While the gutter and downspout industry is mature and higher prices can damage contractors’ competitiveness, two factors will likely shield them from reduced demand:

• Unlike siding and roofing, there are no competitive products that homeowners are likely to choose over aluminum and steel to avoid higher prices; while DIY plastic products exist, they are much less durable than metal types.
• Gutter installation is a relatively low-cost project that’s often tagged onto more costly renovations like reroofing or re-siding, so the cost of the gutter system will not make or break the homeowner’s decision to install.

A sales manager at an Indiana gutter supply company compares this dynamic to buying gas: “people are still replacing gutters – kind of like when consumers wait on buying gas when prices increase, but then realize that they must fill the empty gas tank regardless of cost.”

As long as expected consumer buying patterns hold true, the tariffs will not damage sales for most companies involved in the rainware industry.

For more information on the rainware industry, see the Freedonia Group’s Gutters & Downspout in the US, a comprehensive industry study that includes demand forecasts for gutters, downspouts, gutter guards, and hardware and accessories, as well as for rainware markets, materials, and US Census regions.

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About the Author:

Ellen Kriz is an Industry Analyst at the Freedonia Group where she covers polymers and construction markets.