U.S. Tile Consumption Increases; Prices Decline
The breakdown of these increases are that exports increased by 25.2% (although from a sluggish 2001 sales year) and imports increased by 18.5%. Additionally, domestic factory sales increased by 8%. Italy has garnered 26.9% of the U.S. market, with the U.S. producers holding 22.7%. Following these two are Spain at 14.9%, Mexico at 11.0% and Brazil at 9.1%. About 90% of the ceramic tile sold in the U.S. in 2002 was larger-sized glazed tile (12 x 12 in. and larger, both floor and wall). Unglazed tile also grew, but most of the growth was in the porcelain category (water absorption of less than 0.5%). It has been estimated that nearly two-thirds of the tile produced in Italy is now in the porcelain category. Worldwide, the unglazed porcelain tile have taken market share from unglazed quarry tile. Mosaic tile (those with less than 6 square in. of facial area) have stayed at a low level.
A World ViewWhile the increase in sales is good news, the downside for manufacturers is that prices have been steadily declining. In the past four years, prices have decreased by 8 cents per square foot for imports and 10 cents per square foot for domestic sales. A substantial worldwide surplus capacity still exists to make tile - capacity is at least 65 billion square feet, with consumption running at 55 billion. (This is a rough estimate, as many countries are not accurately reporting their statistics.) Many European and some Asian markets have been in a slumping market condition and are therefore looking at the growing U.S. market as a way to sell more tile.
In the current tariff structure for ceramic tile, duty rates are now 9.6% for large-sized glazed tile and 11% for unglazed tile (and glazed mosaic tile), except for Mexico, which under NAFTA is at 6.3% and 6.7%, respectively. The rates will decrease to 8.5% and 10%, respectively, for all other countries in 2004 and, under the current trade agreement, will stay at that level indefinitely. However, a new round of trade negotiations started at the World Trade Organization conference in Doha, Qatar, has the intent of eventually reducing all duties on all products to zero. In the meantime, the NAFTA rates will drop linearly to zero in 2008.
In a recent survey of tile distributors, the majority (75%) said that the duty rates did not influence their buying decisions. Keep in mind that the Euro went up by over 20% in the past year, and this had a greater effect on tile import prices than the duty rate.
The country to watch is China, which has about half of the world's capacity to make tile (estimated at 30 billion square feet per year). While China has not been a major exporter to the U.S. yet, it is clear that Chinese tile manufacturers have the intention of marketing tile here. Their technology is very modern, and their pricing is very low. Chinese tile will undoubtedly become a formidable competitor in the next few years.
Potential for GrowthWhat will happen in the future? Certainly ceramic tile will remain popular. New styles and designs are emerging all the time. Additionally, tile is long lasting, easy to clean, a good value, and has unlimited design capabilities. The recent period of low interest rates in the U.S., combined with the "cocooning" trends and construction of ever-larger high-end homes, opens the market for continued growth. Traditional areas that use tile, namely kitchens and baths, have also increased in size. U.S. consumption is about the lowest for any developed country (9.3 square feet per person per year, compared to southern Europe at over 40 square feet). We have a long way to go, but our challenge is to find people who know how to market and install ceramic tile in ways that give the consumer complete satisfaction. As always, education leads the way.
For information about the key players in the ceramic tile industry, see the 2003 Giants in Whitewares at http://www.ceramicindustry.com/FILES/HTML/CI_2003_CI_Giants/0,1067,,00.html.