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Structure of the Building Materials Industry
The building materials industry is made up of firms that produce a wide range of materials for use in new/remodeled housing and commercial/industrial construction projects. Demand for and the prices of building materials are very cyclical/volatile and are tied to general economic conditions, including the level of housing starts, existing home sales, and floor-space growth, all of which are beyond the control of industry participants. As a result of the housing bust, significant production overcapacity still exists for some materials, resulting in ongoing pricing pressures. We don’t like the structure of the group.
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