HBS Update with Simon Baker
17 Jul 2024
Demand vs. Supply: What’s Challenging, Driving the SPF Industry Forward
As we pass the mid-year point for 2024, the spray foam industry is simultaneously facing challenges and opportunities. Material availability and shipping conditions are putting pressure on spray foam costs. At the same time, demand for spray foam is growing in the U.S. as homebuilders, faced with their own set of variables, are moving construction toward higher performance homes. Spray foam contractors should anticipate and prepare for impacts from all of these dynamics, negative and positive, as they plan for the remainder of the year.
MDI is a key figure in the industry’s current stress. Demand for this critical material that is spray foam’s A-side is increasing significantly, driven in-part by needs within the construction industry. However, demand for MDI is growing across other industries as well and, while unrelated to spray foam, this demand unfortunately impacts MDI pricing within our sector. Additionally, while MDI demand surges, the supply is tightening. There have even been recent force majeure events at MDI plants in North America, further compounding both supply and pricing.
Notably, MDI is not the only component of spray foam under pressure today. Certain SPF materials commonly sourced from Asia - including blowing agents, catalysts, and fire retardants - are all being subjected to increasing shipping costs. Unfortunately, price increases with all of these materials will put pressure on both SPF manufacturers and contractors. As a manufacturer, we feel it is important to be transparent with our contractors about where the price pressure is originating. That way, contractors will be able to educate their own customers when faced with pricing questions.
Pricing aside, there is ongoing nervousness surrounding the significant number of elections happening globally this year. In total, 49% of the world’s population is estimated to vote in 2024 elections, which are occurring across 64 countries (plus the European Union). Elections deliver change, and thus also bring uncertainty. Only time will tell if, and how, all of these elections will impact global trade, the supply chain, and our own industry.
There are many positive things happening in our industry as well. U.S. demand for SPF is growing and that bodes well for contractors installing the product. Homebuilders are at the center of much of this as they are increasing their use of spray foam in response to tax incentives and increasingly stringent building codes. For example, federal tax credits are available to builders of energy efficient homes as part of the Inflation Reduction Act’s Section 45L, and this is incentivizing them to build to a much higher standard. They are also looking to meet, or exceed, building code requirements, which are becoming more stringent. In both cases, spray foam provides an effective solution.
Builders are also paying close attention to finance programs for new home purchases in order to ensure their homes meet the specific sustainability requirements mandated by those programs, thus giving borrowers access to these loans. For example, HUD and USDA loan programs recently increased energy efficiency parameters for new homes in order for those homes to qualify for their loans. Fannie Mae and Freddie Mac loan programs may also make similar changes. Again, spray foam provides a great solution, allowing builders to not only optimize their new homes, but to ultimately ensure that their homebuyers are eligible for these key borrower financing programs.
As many contractors will already appreciate, we also need to be mindful of what is happening with other insulation materials such as fiberglass and the impact that the current supply constraints have on the overall insulation market and demand for SPF.
Huntsman Remains Committed to Contractors, SPF Industry At-Large
As a major provider of high-performance spray foam solutions in the U.S., Canada and beyond, Huntsman Building Solutions is fully committed to the industry and the success of valued contractors. We understand that while some of this industry update is good news, other aspects, including those about supply and pricing pressures, will be harder to digest. That said, our commitment to you, the contractor, includes being transparent and candid about current industry challenges to help you make the right choices and to ensure you are better able to communicate with, and serve, your own customers.
We will also continue to re-invest in the business to ensure it is meeting the current and future needs of contractors. The good news is that, as a fully integrated producer and manufacturer, we produce our own MDI and thus retain additional control in the process. Not only are we focused on delivering standout spray foam solutions with consistent sprayability and performance, but we are also highly committed to exceptional customer service.
We are also working closely with the country’s builders, delivering product and guidance that will help them optimize their new homes. In fact, we are currently engaged with many of the top 10 production homebuilders in the U.S. These builders are optimizing their new home communities with the assistance provided through our HBS Builder Program and resources. Additionally, through our own efforts, as well as in partnership with Institute for the Building Envelope, Huntsman Building Solutions continues its work on the legislative front. Our primary goals here are to protect and enhance our contractors’ ability to conduct business in their respective regions, to promote and encourage the passing of positive SPF bills, as well as to ensure that builders have the resources they need to understand building code changes and further improve the energy efficiency performance of housing for all.
Simon Baker
President