Raw Materials Revisited

Suppliers discuss current trends and challenges affecting the ceramic industry.

Processing borates. Photo courtesy of Borax, Valencia, Calif.
We've all heard the old adage, "The more things change, the more they stay the same." This is certainly the case with this year's raw materials roundtable. As in past years, CI recently took some time to chat with several raw materials suppliers about the latest challenges, trends and innovations affecting the ceramic industry. Throughout the course of our discussions, a familiar pattern emerged, one that can be distilled into three key points: energy and transportation costs remain predictably high, China is a global force to be reckoned with, and new product development is the order of the day.

Pay to Play

Energy and transportation costs are, without question, two of the biggest challenges facing raw materials suppliers today. No matter what the product, it seems everyone has something to say about the increasingly high cost of staying in business.

"One of the main problems we have isn't so much absolute values when you compare energy prices in different regions, but the speed with which the prices have recently changed," says Miguel Galindo, global business manager - ceramics, Borax Europe Limited. "While we haven't had quite the exposure to energy costs that our customers have because of the amount of natural gas used in firing, a significant proportion of our cost does come from energy, and these costs have been rising very rapidly."

Randy Johnson, vice president of mineral sales at R.T. Vanderbilt Co., Inc., paints a more urgent picture of the energy-pricing dilemma. "Suppliers are either getting relief through their own price increases or they're just dropping product lines; I've seen it happen," he says. "We haven't dropped any product lines, but we have tried to improve our efficiencies in terms of how we mine and produce."

The inexorable link between energy and freight has also led to increased transportation costs, which, in some cases, can exceed the value of the materials being transported. As a result, suppliers have been forced to seek out transportation options that will keep costs low, all the while maintaining a brave face for their customers.

"Higher transportation costs have not affected our ability to provide lower-priced material," says Helen Wright, general manager, North American Sales & Operations at Universal Materials. "Our clients understand that transportation costs have increased, but they still look for the same values-quality product, low-cost material and excellent customer service. In order to combat high transportation costs, we specialize in a 'from our port to your dock' approach, which is essentially a 'just-in-time' delivery program, but a little more complex.

"We discovered that our clients tend to use entire truckloads of material in one operating day," Wright explains. "With proper planning and scheduling, we can bring the material to their closest port and deliver it direct. There is no breaking down of material at terminals, and no multiple loading and unloading or warehousing costs are incurred. Customer service and the ability to take advantage of the global marketplace through currency fluctuations and manufacturing negotiations is important to keeping costs low."

While some companies have chosen to absorb rising energy and transportation costs into their margins in an effort to keep customers happy, there seems to be a tacit understanding among suppliers that there is only so much they can do to offset prices. And though the implementation of energy surcharges may be the most viable option for suppliers in the near future, believing that such surcharges are only "temporary"-as some companies seem to indicate-is undoubtedly naive.

"We've never tried to go that route," says R.T. Vanderbilt's Johnson of temporary surcharges. "I don't think it's very realistic because I don't think energy and transportation costs are ever going to go back down."

A Global Juggernaut

Further complicating matters for raw materials suppliers is China's recent emergence as an import/export powerhouse. Over the last decade, China's ability to provide low-cost materials, labor and end products to the global marketplace has earned it a reputation as either a fearsome competitor or a valuable partner, depending on whom you ask and the context of the question.

According to Mike Lacis, global business manager, Ceramics and Chemicals at OMG, countering the rapid expansion of Chinese-origin raw materials into OMG's European/U.S. home markets is a top priority for the company. However, because many of its customers have cut their own profit margins to compete with new Asian competitors, OMG has, in turn, found itself sourcing lower-cost raw materials such as those found in-where else?-China. For suppliers who are either unwilling or unable to sacrifice more of their profit margins to stay in business, this sort of vicious cycle has placed an added emphasis on customer service as a crucial selling point.

"We are responding to this situation through a combination of leveraging our production capabilities and promoting the home-market advantage of our service relationships," Lacis says. "Manufacturers should also bear in mind that, while supply relationships based on price alone may bring short-term advantages, producers offering a broader, more value-based service should remain a part of the supply base."

Keeping Up with the Joneses

In response to soaring energy and transportation costs and an effective crowding of the world raw materials market, many suppliers have turned their attention to developing products with added value in order to stay competitive. "Ceramic manufacturers usually don't like to change their processes," says Borax's Galindo. "But with price pressures and competition being what they are, we, as suppliers, need to start thinking more creatively and find ways to create more value out of our relationships."

One of Borax's recent initiatives was promoting the use of its Optibor® boric acid formula as a powerful inorganic binder for ceramic wall tiles. The product's superior dry mechanical strength reportedly allows tile producers to reduce production losses and manufacture large format tiles with reduced thickness. "This is a very interesting concept because there is no need for capital investment on the manufacturer's part to create technologically superior products," Galindo says. The company also developed a new microfine sodium pentaborate, called Evansite®, which is designed to help brick and heavy clay manufacturers save fuel and improve properties such as durability, compressive strength, abrasion resistance, leaching resistance and porosity.

Active Minerals Co. takes a similar tack when it comes to marketing its Acti-Gel® 208 magnesium alumino silicate. "We focus on highlighting the technical advantages as well as the cost savings that Acti-Gel can offer," says Robert Purcell, Jr., vice president of Business Development. Although the product was first introduced to the ceramic market four years ago with an emphasis on catalyst supports, it has since found applications in other areas. For instance, in ceramic body formulations, the product is touted as "an excellent flow aid, binder and reinforcing agent in extrusion and dry press applications," while in natural and frit glaze suspensions it is said to "improve adhesive strength, reduce surface defects and glaze chipping, eliminate the need for other mineral thickeners and reduce the need for cellulose ethers, and allow the glaze to dry rapidly without cracking."

Universal Materials uses the exclusivity angle when discussing its latest mineral offering. "As one of a handful of U.S. companies to offer colemanite, we have introduced a 3-32 size rock that glass manufacturers are working with on an experimental basis," says Wright.

Wright also notes that some ceramic companies are starting to switch back to colemanite for glazes. Although colemanite was used in ceramic glazes at one time for its high clay and boron contents, as well as the virtual absence of disruptive gypsum in its composition, a lack of confidence in the quantity of domestically mined colemanite prompted a shift among ceramic manufacturers and hobbyists to glazes containing gerstley borate or other combinations of clays, silica and alumina. However, Wright believes that Universal Materials' recent offering of powder, granular and rock colemanite products is helping to generate a renewed interest in this material. "We've seen an upswing in manufacturer interest in switching back to colemanite, and I predict we'll see a rise in colemanite sales in 2006," she says.

Innovative Solutions

Raw materials suppliers continue to deal with many of the same challenges they've faced in past years. However, innovations in customer service, marketing and product development suggest an unwillingness to throw in the towel in the face of adversity. Despite global pressures and rising energy and transportation costs, today's suppliers continue to develop new solutions for ceramic, glass and brick manufacturing.

Editor's note: The suppliers included in this article are not intended to be representative of all ceramic industry suppliers. These companies answered our survey or agreed to be interviewed for the purposes of this article. Contact information on any of the companies mentioned in this article, as well as other ceramic industry suppliers, can be found in our 2005-2006 Data Book & Buyers' Guide in print or online.

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