I'd like to hear some honest assement of SIP industry economics.

What I don't understand about SIPs is they are a simple commodity material, yet are priced WAY above the raw materials purchased even at retail prices. Typically with most manufactured items, you couldn't even buy the seperate materials retail at the same cost as buying the finished item, because the manufacturer has better buying power.

Yet when you look at the cost of OSB & EPS retail it is 4 TIMES cheaper than panels from a SIP company - and yet the value added is pretty small: just glueing them together! This is not complicated manufacturing! The real value added doesn't happen until you pay extra to have the panel fabricated and installed.

The typical price from all of the SIP companies around here is $4/SF for 6" panels (no fabrication just raw laminated panels).
 
Yet if I go to home depot I can get 7/16" OSB for $4.97 per sheet. And If I go to the foam supplier I can get EPS for $0.12/BF. So the total for the SIP materials retail is:
OSB: $9.94
EPS: $21.12 (4x8', 5.5" thick)
Total: $31.06 or $0.97/SF!

tah,
Let's start at the begining. I want to start a panel bussiness. To start I need a building that is 60 wide by 300' long minamum and 20' high ceilings. I need 60' x 24' for foam storage, I need 60' x 30' for the laminating equipment. I will need 60' x 90' for the presses. I will need 60' x 90' for OSB storage. The balance of the building will be used for completed panels ready to ship. Note* this would be large enough to store only one job inside. I have to heat the building to minamum of 60 degree ambient temperature the entire year. Based on current lease rates for commercial space this will cost about $378,000.00 per year. The utilities conservatively would be about $6,000.00 per year. The equipment for mass producing the panels will run about 500,000.00.
Ok lets bring in the OSB, you can only order jumbo panels in full truck loads so you will need a very large fork lift to handel the unloading of the large bundles and the loading of completed panels. This fork lift I will lease for $1200.00 per month or $14,400.00 a year.
Now I have my building in place and I do not want to be a fly by night operation I want to produce stamped third party certified panels. First you will need to do full scale distructive testing at an approved testing agency. Lets start with the transverse loading test. We need to provide the lab with three panels for every test we want to perform. Let's say we are going to test 4 1/2" x 4' wide x 8'-10'-12'-14'-16'-18'-20'-22'-24' long panels with spline joints, multiply that times 3 so you will need 27 panels. Each test for each size we will say for coversation sake cost's $3,000.00 times 9 different sizes equals $27,000.00. Now that is only one thickness and that is only 4' wide. I want to test all 5 thickness of panels I am going to produce and I also want to test my panels with different splines such as double 2x splines and engineered lumber. Ok thats 5 thickness times $27,000.00 equals $135,000.00 times two because I also want to test with structural splines that comes up to $270,000.00. Now I still have my Axial, Raking Shear, 15 Minute Fire Test and my 1 Hour fire test. I will need to provide all the panels for them also. For this forum lets say the rest of the testing will run $230,000.00 for a grand total on testing of $500,000.00. Keep in mind if you make any changes in the skins or the way you spline your panels you will need to redo these tests again.
Now we have our testing done so we will submit this information to ICCES for approval and acceptance. After about 9 months of going back and forth with them about specific details they have issued us a NER# Guess what, they do not do it for free. Lets say that this number will be $50,000.00. Then you know what they have the nerve to do, charge you a fee every year to maintain that number. Lets say that is $5,000.00
Keep in mind we have not sold any panels yet. Now we have to contract with a Independant Third Party Testing Agency. Lets say their yearly contract will run about $5,000.00.Now we can sell Stamped Code Approved Panels.
Ok lets get a couple employees and some insurance to get the line up and running. Employees lets say three production people, one office person and one salesmen. With insurance per year that will be, lets say $250,000.00
Ok now we can produce our own panels that are code recognized and third party certified.
Cash out of pocket for the first year without producing 1 square foot of panel is $1,208,000.00.
Now our aticipated production for the year will be 500,000 square foot of panel. That equates to $2.42 cents a square foot you must add to your material costs just to brake even then you would like to make at least a 10% profit on you panels, so we will add $.24 a square foot. Now we will add in the material costs as per your figures, $.97 square foot for a 5 1/2" thick core panel that comes up to $3.63 square foot.
After the first year you can back out about $.50 square foot because you do not have any additional testing costs until you want to make changes. Although you want to keep up with the competition, so you will need to do some testing on a regular basis. You will not have your equipment costs after the first year but that money will be rededicted to maintenance, advertising, trade shows, home shows, etc.
I hope this helps you understand how a panel company operates and why the square foot price is what it is.

Our panels are slightly less than $4/sq ft pre-fabricated.  Most builders tell us that they are saving money by purchasing our systems (we use 6 1/2" SIPs for walls) because if they had to purchase all their 2x6's, OSB and cellulose insulation, it would cost them more to obtain an R-25 with stick than it would with SIP!  Now, factor in labor savings of up to 50% for installation of SIPs vs stick framing...hmm...still looks like SIPs are cheaper, not more expensive than stick.  Really, this is besides the point though...why would you want to compare a K-car to a BMW?  The quality of a SIP home vs stick is far superior.  For the added value the customer gets using SIPs (energy bills cut in half, more structurally sound, quieter, healthier, environmentally friendly, higher re-sale....I could go on...), the industry could be charging a lot more. 

Thanks for the info, but I think $1million inventment is very small on the scale of commerical ventures, and the fact that it pays for itself in the first year is amazing.

Take a OSB plant for example. Far more sophistication, far more capital investment, $5 per sheet. If the SIP industry made OSB I would cost $70 sheet. Perhaps the problem with SIPs is the small mom & pop shops that make them.

Let look at your investment a different way, speading the startup costs over 30 years with a loan:

We'll even make it more automated and spend twice as much, say $2 million
Plus say we have $500,000 in annual expenses (insurance, operators, electricity)
Plus say our wholesale rate of the foam & OSB is 30% cheaper.

Our loan on the capital @ 7% interest is $67,000/year
Our annual expenses are $500,000
Our material costs on 1 million SF of SIP is $679,000.

Our cost per SF is $1.24 @ 1 million SF of SIP.
In scale I'm sure it could be done for less (roll the foam factory into the same enterprise, etc)

That would be true if it DID save money. Personally, I've yet to see a SIP project that saves labor. I'm sure it can be done, but only if the house is specifically designed for SIPs, has a VERY SIP knowledgable architect/engineer team, and a very expereenced SIP crew - but seeing from projects in my local area I'm guessing most SIP projects save no time at all, as those three stipulations are still rare in the industry.

The reason I'm bring this up is, that lumber costs have fallen throught the floor- and yet SIPs have only gone down a little. Labor has been freed up significantly, thus becoming cheaper, as the housing market is slowing. SIPs have to compete with convential construction. The thing is, if I can buy the same materials for a 1/4th the price, but just rearrange them for convensional construction, you need to either REALLY save on labor, or bring down your cost.

So this is what your are competing with:
1. Stick framed 2x4" 24" OC + OSB
2. EPS foam infill cut to the cavity size at the EPS factory, and sealed into place on site.
3. 2" of EPS foam extra sheathing on the outside to raise the R-value to a 6" SIP equiv

Materials for a 4 x 8' panel equivalent:
1. OSB: $4.97
2. (2) 2x4": $4.40
3. EPS: $21.12
--------------------
total: $0.95/SF

If a SIP package cost $40,000, you'd need to save $30,000 in labor. Thats 1200 hours of labor at $25/hour!

No SIPs need to be cheaper.

No that is just marketing to make people feel better about their purchase - easy to do since it appeals to the "its newer, its better" syndrome.

I'm a energy engineer, and a knowledgeable proponent of SIPs. But they have to be cost competitive. Believe me I could make a stick framed house out perform a SIP house in every way. (BTW sound? You've got to be kidding me, SIPs do a lot of things nicely, but this is their Achilles heel, not an asset. Have seen their STC rating?). The question in both cases is cost, how much extra cost for SIPs, and how much extra cost for supercharging stick-framing.

In the above reply I showed the same materials rearranged for the same R-value, at much less cost. And with the same amount of mastic/foam that goes into a SIP house, yes I can get the same air inflitration numbers.

I'd like to see some honest case studies of people who consistantly install SIP homes with a 3-4+ times labor savings.

You don't want to go there do you? What do you think that the 'Material' costs are for a bottle of Coke or Pepsi(Sold for $0.99)? Hint: The Bottle is more expensive than the materials!

Mr. Casey stated the facts pretty clearly, and if a company doesn't make a profit, it will eventually fail to exist. And since most SIPS are American made, many American citizens have jobs.

If the day ever comes that SIPS are imported by the boatload from China, you might get your cheap SIPS, but the cheap price would be steeper than you can imagine.


Whose Panels?


You were doing ok until you mentioned quieter.


Now that is funny! Price is the biggest obstacle to building with SIPS. We live in a WalMart society, price(unfortunately) is everything. And, you guys publicly state(to suit your product line) that SIP roofs are too expensive. You can't have it both ways.

Tah has hit a sensitive spot for sure. The issue is profit! And the SIP companies are eating their own children and can't see the OSB through the trees. First is has always been a volume and pricing issue. Unless a Walmart moves in and makes SIPs available everywhere, the mom and pop SIP companies will continue to price their SIPs where small volumes pays for retirement. And the SIP companies do a horrible job of providing incentive for commissions for bringing customers. We should send all the SIP factory owners on a trip to Jamaica so they can see how commissions work. Finally we need a good lobby or need to support the SIPA organization to the point that they can make SIPs prescriptive. ICFs are prescriptive. How come SIPs aren't? Imagine if you could take a few thousand dollars off the price of a home if it doesn't need to be engineered? And I am not talking about the mansions, I am talking about the affordable homes. Finally, why doesn't someone do something to up the ante on the marketing of the product? The word panel has to go. And perhaps the styrofoam could be painted gray or black to just look stronger. Wouldn't it make sense to make a product that looks like concrete rather then a product that looks like a coffee cup? At any rate I am not trying to beat up on the producers, but they need to see their opportunity. What is going to happen to all the SIP plants when someone like Pulte builds a supply link across the US??

Panelcrafter 'If the day ever comes that SIPS are imported by the boatload from China, you might get your cheap SIPS, but the cheap price would be steeper than you can imagine."

That day is here. I price a 40' contanier delivered to east coast, savings was there, but I cant imagine the dialiing Bejing, hello Bejing! Umm weve got a problem....

Obviously, I was only talking about raw panels.

TAH,

I think you missed the obvious.

Sure there is validity to the capital argument and ongoing expense and such, but then you are also right about "mom and pop" size not being able to leverage better efficiencies (economies of scale that say... LP, GP, etc.) that the larger construction products corporations could do. But WHY should they?

Be it SIPs, ICF, or whatever "alternative" method today, NOTHING beats the 100+ years of experience and refinement (in process - construction, etc.) that STICK has in America. This scenario is really no different than our PC's OS monopoly. No one wants to invest their time and all the old dogs could care less to learn a new trick if they are happy with what they know and how much margin that enables them. EVERYTHING is designed around STICK, just like it is designed around MS Windows. They got the leg up and it is hard to change that mindset... let alone existing capital already paid for... for said stick products/processes.

I don't think people are being greedy. If they were greedy, they WOULD make the business case and corporations like GP, etc. would be on the band wagon. BUT obviously, they know it is too difficult a seller, because builders are so entrenched in STICK. And look at the builders aspect... why would they change? What is IN IT for them really? Risk as you've experienced?

In the end the only way it will drop in price (because I, too, feel it is phsyically a more affordable product) IF the customer demands it. But how many customers know the difference between SIP and STICK and ICF and whatever? About nill.. relatively. There is another method... mandate it (for "efficiency sake"), but then that is a whole 'nother argument.

It's all a big Catch22 with all parties involved not willing or knowing any better what to do to grow it (so that economies of scale and popularity of use makes it a norm like STICK), because they're all waiting for each other to JUMP on the bandwagon. Sad, eh?

As a manufacturer, designer, fabricator and installer, I can confidently state that there is much more involved to all those processes than just  going to Lowes or Home Depot and buying some OSB, Foam and don't forget the MCU (moisture cure urethane) next to the bathroom caulking, I think???? Then slapping  the panels together, applying 6psi or 27,648# of pressure for 20-30  minutes at 70 degrees.  All this can be done in your basement or garage ( if it were approx. 20,000 sf, then cutting the 6.5" panels with your Black and Decker skilsaw, twice......then scooping out the foam with your BBQ briquet starter.  Once you recover from being unconscious from the smoke caused by burning  the EPS out, you can then, cut the engineered lumber you bought at Lowes or Home Depot at $ 2.39 Lf(which you cannot purchase at Retailers) and insert the lumber with nails and bathroom caulking you purchased.  Need I say more.  I am tired of typing. Actual costs tend to run approx. $ 2.05 SF for 6.5" fabricated panel @ 1 million SF produced annually.  We actually manufacture 8x10, 8x12 and 8x24 panels.  Read PATH.net before you obloviate further.  Have nice day.

Gentlemen,

With all due respect to everyone, this is America, the land of capitilism. Supply and demand will ALWAYS make the market what it is. If it was cheaper (significantly) to produce this product AND sell it, then that way will be found and exploited. The microsoft example is a good one to look at. Is it the best product? No. Is it "good enough" and priced just right to keep competion out? Yes. This is stick build. It is a "good" product and priced under what SIP panels are currently selling for. If and when a LARGE company can afford to produce, market and install (key) SIPs that are priced competitively, then sticks will go bye bye. Until that time, it won't happen.
BTW, I purchased SIPs and built myself. Two main reasons for me were (1) I felt the product would be better and (2) I could do it myself in a reasonable time frame. I don't think I am the type of customer that will lead the SIP industry to a revolution. You have to get the builders in. Humbly submitted.

"Actual costs tend to run approx. $ 2.05 SF for 6.5" fabricated panel @ 1 million SF produced annually. "

and sell them for $6 sf. those are almost obscene profit margins that very few businesses in america can match. i love the sip concept but have stopped using them for now. they simply are not cost effective with the price of lumber today.
i try to make a point of going and looking at all of the sip projects going in my city. we have a vibrant housing market here. last year i could not find one sip home to look at. builders here have abandoned them even though we are less than 100 miles from the enercept factory.

My point isn't assuming that quality SIPs can be built in by anyone in their garage, but rather comparing the cost of the same materials used conventially.

Having said that, SIP construction is garage technology - it is fundimentally nothing more than gluing OSB & EPS with a little pressure. Pretty simple - not much value added from a manufacturing standpoint, though a lot of value in functionality.

It is a very basic building block, thats is over-priced. Where the real value is added is once the mfg starts mod-ing and pre-fabricating panels. Otherwise SIPs are just like any other building material: they need to be cut, trimmed, installed, nailed, etc - only at a 4 times materials cost basis.

I like SIPs, they have a lot of potential. But they just need to be cost competitive - frankly there is nothing so special about the technology that should make them expensive. Raw panels should cost the same or less as what a consumer could buy the OSB and EPS retail. I can't think of another manufactured item that the consumer could buy the material retail and assemble with little effort (glue and a vacuum bag), and do it 4 times cheaper than a mass produced item.

Fundimentally the bottom line is the industry isn't going to go anywhere very fast being more expensive than stanadard stick framing - and yet from a potential cost perspective, SIPs could be cheaper.

You make good points there and I believe similar, BUT... SIPs for homes are not quite the same as doodads from HD.

As you assert... money is king. If the SIP strategy was so great and clear cut, Pulte and every other large corporate builder would be on the bandwagon, but they are not. Actually, I hear Pulte is dabbling in SIPs, but I think it is an experiment for them... not wholesale strategic move. I could be wrong.

Anyways... my point is that there are MANY variables to the product we call HOUSE. The SIP unit iteself is just one component in a big system... unlike said Doodad.

For the SIP to become popular (thus build to a level where economies of scale would jump in and make it cost competitive on a piece cost level AND an installer cost level), many things must fall into place, but it can't and I fear won't any time soon... for the reasons I mention with the Catch22 scenario.

Until efficiency for energy sake is MANDATED (because most people are not going to volunteer for it), everyone (customer and builder and MFR) will sit back just waiting for each other to make the first move. It's too much risk for all parties, because STICK is so competitive THEN, NOW, and TOMORROW. For the most part SIPs are relegated to custom homes, because generally a tiny fraction of consumers buy into its assertions of efficiency... and can accept the premium. Likely in the belief of long term benefits.

As with others things in our culture... change for conservation will only happen after something catastrophic occurs. We have a bad track record for being pro-active.

P.S. I don't quite agree with your assertion that builders are the full blame with McMansions. I dare say most the blame IS the consumer. They make the final decision. They don't have to buy into the junk, but they do... mostly because they don't know enough about home construction or products to know the difference between junk and quality... or something in between. Priorities.

Because I hate typing, I'll make this short. Most, if not all of the SIPs companies I know of don't have the marketing strategy that we have instithuted. Yes, we have custom home projects, but that isse 5% of our business. The other 95 % is multi-family and commercial. Because of our capabilities, we will supply and install this year 1.5 million SF. We will triple that in 2008. Our SF price runs an average of $ 3.95. The industry has been complacent over the years. BTW, PATH is presciptive method and show me another construction method that is exempt from DOE / Energy Star "Blower Door" test. SIPs may be expensive in your area, but here in N.C. , S.C. and Georgia, it would more expensive to build with sticks. Engineered structures are the way to go. We as an industry, must all get on the same page period. There are great marketing ideas out there. Leads are abundant. Use BlueBook.com and Bidclerk.com for your areas, it might cost $ 300.00 a month (50-70 leads), but volumes of work will cure all your ills. If anybody needs assistance, please don't hesitate to call or email me directly. Have a nice day.

PS... Pulte did not spend $ 3 million to try anything. They are using SIPs for there walls.

J. Jeff,

PATH may be prescriptive to receive an energy credit or get a star on your brochure, but what is really needed is for SIPs to end up in the code book. Until a framer has an option with building with SIPs and knows that a 4' opening doesn't need to be engineered, then the SIPs industry won't catch up. I see ICF's in the code book. And while "engineered" systems are better, they don't necessarily create something that provides more value from a structural standpoint. My grandmother's home recently sold for over $300k, was built with sticks and lath and was built by her parents for a few thousand dollars. It needs some updating, but will stand many more years without engineering.

Next, without shipping, your #3.95 price is too expensive when stick construction goes for less then $2/ft. Thus a square 2400 sq ft home with 10' walls is $4800 more expensive before you add shipping, engineering and marketing. And that is without a SIP roof upgrade. The issue is that when your upgrade approaches 8-10k, you will have a hard time justifying the upfront cost. If the loan cost and rise in energy costs are steady, your upgrade may not pay for itself.

I have to at least give our lawmakers credit. They have seen the ultimate value in saving energy. It ultimately will cost more more money and IS likely to rise at a rate above loan interest so home buyers are likely to see a ROI on their energy upgrades. And providing direct incentive is great when the math is close. The industry needs to get where the equation is lop sided in terms of the upgrade.