US Composite Siding

Report Overview

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Demand for composite siding in the US is forecast to increase 1.8% annually through 2025 to 48,000 squares valued at $172 million. Factors supporting demand growth include:

• increases in building construction
• rising use of metal composite siding on commercial buildings
• increased specification of plastic composite siding products on some higher-end homes

However, composite siding products are expected to be restrained by a lack of consumer and contractor familiarity with this type of siding and the high initial cost of many of these products compared to more mainstream materials, particularly vinyl.

Commercial Market to Drive Composite Siding Gains

The commercial market accounted for the majority of composite siding demand in 2020 and is expected to drive gains through 2025. The light weight, durability, and aesthetic appeal of aluminum composite siding, for example, will lead to the increased adoption of this material on such commercial buildings as schools, healthcare facilities, government buildings, and car dealerships, where a metallic finish can provide a modern look while reducing the need for maintenance.

Faster adoption of these niche products will be restrained by the high cost of the material, as many cost-conscious institutional organizations and building owners opt for less expensive siding materials that provide comparable durability, even if they lack the same pleasing aesthetics.

Production Innovation to Boost Adoption in Residential Applications

Manufacturer efforts to improve the quality of composite siding products will lead to rising use in the residential market, particularly in high-end single-family homes. Producers will opt for different plastic composite materials that provide enhanced performance properties such as improved moisture resistance. In doing so, manufacturers will look to take market share from better established siding materials, such as engineered wood and fiber cement. Additionally, more high-end multifamily homes are expected to opt for aluminum composite siding primarily because of its aesthetic appeal.

Pricing Trends

There are many different types of composite siding, and pricing trends are largely dependent on the type of raw materials required in the manufacture of each siding product. For example, the spike in plastic resin and raw metal prices significantly raised the cost of metal-plastic composite siding products. Additionally, high lumber prices can place upward pressure on composite products that use natural wood.

The average cost of composite siding is high relative to most siding products, in part due to the role played by aluminum composite panels used on commercial buildings and some non-metal composite products used in high-end residential applications.

Average composite siding pricing is expected to grow less than 1.0% through 2025 to $358 per square. Many manufacturers are expected to experience short-term production issues that may increase pricing, such as:

• supply chain issues
• labor shortages
• raw material cost increases

However, these issues are expected to stabilize by 2025, limiting price growth over this period. Additionally, these are niche products seeking greater siding market penetration, and thus producers will be less likely to attempt to pass on production costs to price-conscious consumers in the siding market.

Factors That Impact Composite Siding Demand

Construction Industry Outlook

The most important factor to siding sales is the health of the US construction industry, and in particular the construction of buildings. Siding is a critical and necessary component of all buildings constructed in the US, although the type of siding may vary significantly depending on whether the structure is residential or commercial, and whether it is new construction or renovation.

Real (inflation-adjusted) expenditures on building construction in the US are expected to grow 1.0% per year through 2025, a significant deceleration from the 2015-2020 period.

Trends affecting the residential market for siding include:

• New single-family housing will offer better prospects than multifamily housing, but starts will only increase in 2020 and 2021, before declining through 2025.
• Multifamily housing construction will fall over this period, though average unit size will increase, mitigating the negative impact on siding demand.
• The sizable stock of older housing will support gains in improvement spending. However, growth will decelerate from the 2010-2020 period.

Commercial construction activity is anticipated to moderate, as there will be less impetus for businesses to expand; demand for their products and services will not increase as quickly as it did between 2015 and 2019, in part due to the business closures and building vacancies resulting from the COVID-19 pandemic.

The segments of commercial building construction will see the following trends:

• The fastest gains will be for industrial buildings as construction rebounds from declines posted during the 2015-2020 period. However, spending in 2025 will remain below the peak level of 2015.
• Economic expansion will support demand for some new office space.
• Construction of warehouses and distribution centers will expand as retailers hone their omnichannel sales strategies and attempt to reduce delivery times, particularly in response to the shortages of many goods resulting from the COVID-19 pandemic. Trends in construction of retail outlets will be weaker.
• Institutional building construction expenditures will rise, although construction of educational buildings will be restrained by little or no population growth in the prime school ages. Spending on education and religious segments will remain below 2010 levels.