Whitewares Market Overview: Consumption & Imports Rise in the U.S. Tile Market
According to the U.S. Department of Commerce, U.S. consumption of ceramic tile increased 10% during 2004, from 2.87 billion square feet to 3.14 billion square feet, and the dollar volume climbed 12.6% to $2.8 billion. This was largely due to the continued strength in the housing market. Harvard University's Joint Center for Housing Studies (JCHS) reported that new and existing home sales, single-family starts, residential fixed investment and remodeling expenditures all hit record highs in 2004. Existing home sales, which rose 11.2% overall to 6.8 million units, were up in every state except Michigan, Montana and Utah. Single-family starts hit a record 1.6 million units in 2004, while multifamily starts remained within the same 330,000 to 350,000 unit range of the past eight years. With demand rising and prices soaring, condominium starts also increased last year to 121,000-up from only 71,000 the year before. Additionally, homeowners spent $198.6 billion on improvements and repairs, a 9.3% increase from 2003.1
All of this was good news for U.S. tile manufacturers. According to a recent report by Market Studies, domestic manufacturers' shipments expanded 5.6% in 2004 on strong demand for larger-sized glazed tile. After a 10-year slide, average prices for ceramic tile improved by 2.4% in 2004, with further price hikes expected in 2005. Exports of U.S.-made ceramic tile rebounded by 26.9% in 2004 on a unit basis, while dollar volume posted a 12.6% advance, driven by strong demand in Canada, Jamaica and the UK.2
The continued high demand for tile, combined with investments in state-of-the-art manufacturing plants, is helping companies overcome soaring natural gas prices and high labor costs to post significant gains in operating margins. According to Jeffrey S. Lorberbaum, chairman and chief executive officer of Mohawk Industries, Inc., Dal-Tile's 15.8% operating margin in the first half of 2005 was one of the highest the company has recorded. The company's recent investments in Dal-Tile have included the expansion of manufacturing plants in Muskogee, Okla., and Mexico, as well as new distribution points and new design galleries. Interceramic, which opened a new tile manufacturing facility in Chihuahua, Mexico, in the second quarter of 2005, saw its operating income rise 5.3% for the first half of the year, primarily due to strong sales in the U.S. and Mexico, as well as improved efficiencies in its manufacturing and distribution processes.
To capitalize on the strong U.S. market, the Italian tile producer Graniti Fiandre created a new subsidiary, StonePeak Ceramics, Inc. In June 2005, the company opened a new $50 million, 628,000-square-foot porcelain tile manufacturing facility in Crossville, Tenn. (See the related Online Exclusive article.)
According to The Freedonia Group, Inc., U.S. demand for hard surface flooring (including ceramic tile, laminates, stone tile and wood) is projected to advance 5.5% per year through 2009 to 11.7 billion square feet, a slight acceleration over the 1999 to 2004 period.3 However, imports will continue to feed much of the demand, as U.S. shipments are expected to rise just 2.1% per year to 6.4 billion square feet during that period. Trends toward high-end, value-added products should help boost gains for ceramic tile.
Editor's note: The foregoing information (except where noted) was compiled from publicly available information in annual reports and news releases, as well as personal interviews. References can be found with this article online at www.ceramicindustry.com.