State of the pool and spa industry
Released: June 10th, 2021
The swimming pool industry as a whole is in the midst of a “perfect storm” triggered by the Covid-19 pandemic but intensified by numerous other occurrences that have taken place during the past 12 months. Demand for our products is higher than it has ever been due to what industry experts are calling the “cocooning effect”. This refers to the overwhelming shift in consumer sentiment prioritizing investments in personal property over travel and family vacations. Simply put, when the world was told to stay home last year people began looking around their homes and deciding to move forward with projects they had been putting off for years.
Swimming pools quickly became one of the most desired home improvements worldwide at the same time as governments started telling manufactures to put their operations on pause. As a result there was a massive shift in the industry’s supply and demand balance which the entire industry is still trying to catch up with. While we all continue to work tirelessly to “get back to normal”, people remain concerned that what we all just went though could happen again. Despite economies and boarders being reopened in recent months, demand for our goods has only continued to grow while production of these goods is still nowhere near 100% of what it was pre-pandemic. There are no specific items or product groups that are an exception to this massive disparity in the supply and demand spectrum however there are certain sectors of the industry that are dealing with additional severe complications beyond the surge in demand.
In August of 2020 Hurricane Laura slammed the gulf coast and cause a fire at the BioLab Chlorine plant in Lake Charles Louisiana. This plant was responsible for 40% of the United States Tri- Chlor and Dichlor chlorine production. Being the industry leader in the production of these essential sanitization products, BioLab is said to have lost a significant amount of it’s on hand inventory while also being unable to produce new product. This event occurred in the midst of unprecedented growth in demand for these products creating a world-wide shortage of chlorine related items. As a result, prices have skyrocketed and all vendors have instated allocation limits, only allowing distributors to purchase a percentage of previous year’s usage. Distributors have been forced to do the same with their retail dealers which may ultimately result chlorine becoming unavailable mid-season.
Plastic (white) Goods:
In early February of 2021 a winter storm swept across the southern United States resulting in a state of emergency declaration by Governor Greg Abbott. State wide power outages occurred while sub- freezing temperatures took hold over the region for over a week creating a worst case scenario for the pool industry. Majority of the pools in this region do not get winterized as temperatures rarely dip below freezing. When this weather phenomenon finally came to an end, millions of homeowners found their pool equipment and plumbing completely destroyed and retails stores were flooded with phone calls from people looking to purchase equipment and schedule repairs. In the midst of an already strained supply chain due to the “cocooning effect”, this sudden increase in demand for products immediately pushed industry lead times even further out than they already were. Whatever available product that was in the market place was quickly bought out as pool service companies began performing work months earlier than they are used to in this part of the country.
Making matters worse was the fact that 80-85% of United States Polyethylene (PE) and Polypropylene (PP) production occurs in the Houston area and these plants were suddenly shut down without notice by the power outage. These are the key ingredients in refined resin which is used to manufacture plastic goods used in all industries including for swimming pool and spa components. When the power came back on these plants found that their infrastructure had been severely damaged and many of them were not able to resume production until their pipelines had been disassembled and manually cleaned out. This process took anywhere from a week to a month plus all while demand for plastic goods continued to increase nationwide. Manufactures who rely on PP and PE based resin to manufacture their products began looking over national boarders to try and source their needs. For a limited period of time many started paying higher prices for material refined in Mexico. This was a short lived solution as on February 26th a fire broke out at one of Mexico’s largest PE production facilities halting their production and further restricting PE resin supplies worldwide. At the time of this writing, several of the Texas based plants are back up and running but many are still not and the effects of the shut downs in early February are just now starting to be felt at the retail level of the swimming pool industry. This shortage is impacting every item that requires plastic to produce. Above ground ladders, solar products, spa stairs, etc. have all been sold out since early March and the industry is now dealing with the harsh reality that core items like skimmers, return fittings and PVC plumbing/fittings will be in short supply for the months and maybe even years to come.
Above Ground Pools:
Most above ground pools are manufactured in Long Island, New Jersey or Canada. These areas were hit hard by the initial wave of COVID and were placed under some of the strictest work stoppage orders by local governments in the early days of the pandemic. Demand spiked at the same time as production came to a complete halt for nearly 2 full months. Demand has only increased since then and manufacturers are years away from being caught up as they have yet to resume 100% production
ability. Above ground pools were one of the first groups of products to be declared as sold out for the 2021 season followed quickly by above ground liners. While manufactures are continuing to produce, they are struggling to achieve 100% production output due to a diminished workforce and massive disruptions in the supply chain. All of this has resulted in shipments being delayed months and distributors being told that the pools they expected to receive in the first quarter of 2021 will not be shipping until late in the 3rd quarter or early in the 4th. The severity of the supply chain issues being dealt with now was not clear at the end of 2020 and so there was a sense of optimism that above ground pool manufacturers would be able to ramp up production to all-time highs and accommodate a larger portion of the surging demand. Sadly that was not the case and dealers across the country are being forced to postpone or even cancel jobs they sold in the fall of 2020 due to the fact pools are just not coming in on time for the 2021 summer season.
Raw material shipping from overseas is not arriving in quantities large enough to accommodate the increased demand or even the demand of a normal season. Imported vinyl makes up the majority of raw material used to produce above ground liners in North America so this shortage of imported material drastically reduced the number of finished above ground liners entering the market for the 2021 season. Domestic raw material for above ground liners was depleted in late 2020 and manufacturers are now focusing all of their efforts on producing in ground material in an attempt to keep up with the demand in new construction (In ground pool liners are custom made to order). Many companies have considered using more expensive in ground material to produce above ground liners and while some have gone in this direction, they’ve done so knowing they will need to charge close to double if not more for these finished products.
Lead times on in ground liners are currently at all-time highs. The surge in demand coupled with the worldwide PVC resin shortage has resulted in pattern outages with all of the raw vinyl suppliers, many of whom have declared Force Majore (defined as “unforeseeable circumstances that prevent someone from fulfilling a contract). Manufactures who rely on that raw vinyl to produce in ground liners are currently taking in over twice as many orders daily as they have the ability to build. It is expected that lead times will continue to grow as the season progresses due to Texas’ petrochemical complex continuing to struggle with getting back online.
The availability of common pool and spa equipment may become one of the biggest problems our industry faces in the months to come. The increase in demand for new swimming pools worldwide would be enough in and of itself to create an impactful shortage of these supplies but that far from the only complication we as an industry are dealing with on this front. The winter storm that hit Texas in February destroyed millions of swimming pool equipment packs and plumbing manifolds. This created a sudden and unexpected spike in demand for equipment repairs in a part of the country that traditionally sees significantly lower annual demand than that seen every spring in the Frost Belt due to the harsher winters in the northern states. Every year equipment manufactures spend the winter months building up inventories to try and accommodate the sudden spring time demand for their goods as pool season approaches. When the devastation of this storm was realized, retailers and service companies in Texas began ordering plumbing supplies and equipment at a faster rate than ever before. The manufacturers were already dealing with decreased production abilities due to raw material and labor shortages and so their inventory reserves were quickly depleted. Many have taken drastic measures to try and increase production but a diminished work force, COVID outbreaks in plants and a lack of raw resources needed to manufacture have hindered those efforts significantly. As a result, it has gotten harder and harder for these manufactures to ship orders into markets that are just now starting to see demand for their goods grow as the weather gets nicer.
Complicating things further is the worldwide shortage of microchips and semi-conductors. The news has been reporting on vehicle manufacturers closing down plants all across the world due to the fact they cannot get microchips needed to build the complex electrical systems that are now standard in every make and model on the road today. Majority of these components are made overseas and when COVID hit in early 2020, these factories were forced to scale back production to meet social distancing standards or close all together to combat the pandemic. As more people began working remotely and schools moved to their remote learning models, demand surged for lap top computers and high end smart phones/tablets resulting in a massive backlog of orders for the semi-conductors needed to build these products. This shortage is now affecting all industries including ours. In recent years variable speed pumps, automation systems, solar systems and high efficiency heaters/heat pumps have become common on swimming pools and spas worldwide. The lack of available chips and conductors has halted production of these items at a time when demand has never been higher. This complication is just now reaching the pool industry and has created a massive shortage in the supply chain for these goods.
At the onset of the pandemic and government lockdown orders hot tubs and spas quickly became one of the highest in demand appliances for homeowners everywhere. The demand for these items outpaced that of swimming pools because the spatial requirements and initial investment are far less than that of a pool. Combine this demand with all of the factors outlined previously and you get a recipe for unprecedentedly long lead times. Spas are some of the most complex appliances in the leisure market place today and are directly impacted by the microchip shortage (used in control systems for spas) the resin shortage (used to produce the shells of spas and plumbing) the lumber shortage (used to construct the frame of spas) and the skilled labor shortage. Many spa manufacturers are currently scheduling production time well into 2022 for open orders and it is likely those lead times will be pushed even further out as these shortages hinder production ability in the months to come.
Possibly the most significant complication our industry faces at this time is logistics and transportation of goods. During the COVID shutdowns the shipping industry was faced with closing ports or operating them with a limited workforce to combat the spread of the virus. This resulted in tens of thousands of container vessels being forced to wait off the coast of their destination ports for weeks or even months on end while the ports worked to off load vessels at a pace slower than ever before. Some nations required these vessels to quarantine off shore before being allowed in to port to be offloaded. As the backlog of ships continued to grow, a worldwide shortage of available shipping containers became one of the most significant complications every industry was forced to deal with. Prior to the pandemic the United States was already dealing with a shortage of over the road commercial truck drivers. This shortage was made even worse as travel restrictions were implemented and many owner operators decided to protect themselves and come off the road until the pandemic was brought under control. This further backed up the shipping ports who struggled to find trucks to take the inbound containers to their final destinations. As a result, the entire shipping industry was backlogged and is still struggling to catch up. The blockage of the Suez Canal in March of 2021 further extended this backlog creating even more demand for containers that were becoming harder and harder to find. Shipping carriers were forced to increase their rates drastically as demand swelled for containers resulting in a “full blown container crisis”. These transportation cost increases get passed down the supply chain at every level and have contributed in large part to the increases in costs we have seen throughout our industry.
Any one of these complications in and of itself is enough to disrupt the supply chain and result in a shortage of product and an increase in pricing. All of them combined truly do equate to a “perfect storm” that is not unique to the swimming pool and spa industry but is devastating none the less. Below are several links delving deeper into each specific category outlined above. While this information is not comforting by any means, the intent of this article is to help you and your customers understand the challenges we as an industry are up against this season. I sincerely hope it helps in that regard.Back