Residential Construction Boosts U.S. Brick Demand; Commercial Markets Expected to Improve

According to the U.S. Commerce Department, shipments of common and facing brick increased 1.2% in 2002 to 8.04 billion at a value of $1.72 billion, compared to 7.94 billion at a value of $1.68 billion in 2001. The South Atlantic region accounted for 37% of total brick shipments in 2002, with North Carolina alone comprising 16.9% of the total. The West South Central region (Arkansas, Louisiana, Oklahoma and Texas) accounted for 19.1%, while the East South Central region (Alabama, Kentucky, Mississippi and Tennessee) accounted for 18.2%.

Shipments of structural facing tile and ceramic glazed brick decreased 20.3% to $10.9 million, and shipments of vitrified sewer pipe and fittings decreased 5.6% to $50.4 million.

The U.S. housing market remained robust throughout the year, with low interest rates and low housing inventories supporting high levels of activity. However, non-residential activity was weak, resulting in low levels of sales to the commercial sector. Average selling prices for brick in the U.S. were also slightly lower compared to 2001, due to over-capacity in the Carolinas and the increasing availability of a broader product mix. Many U.S. brick manufacturers are also facing a rise in energy costs as previous contracts for natural gas expire and are replaced by new contracts at higher prices. This is forcing plants to review their operations to ensure maximum energy efficiency, and is also causing more companies to evaluate the use of alternative fuels.

Australian markets saw an increase in both residential and non-residential construction in 2002 and early 2003. Prices were also slightly higher, which helped boost operating margins. In Asia, South Korea saw a rebound in construction activity in early 2003 after experiencing a slowdown in early 2002. Conditions in Thailand also continued to improve, with new house construction particularly buoyant, and Indonesia¿s market growth also continued through early 2003. Demand in China also grew in late 2002 and early 2003; however, the market in China remains difficult due to continuing supply overhang.

The economic climate in the European Union remained relatively weak in 2002, largely due to the continued downturn in Germany and weakness in Austria, the Netherlands and Portugal. However, the UK continued to experience a solid demand for new housing and a strong repairs, maintenance and improvement market, and Italy and Spain also recorded strong growth. With the exception of Poland, the reform countries of Eastern Europe experienced construction growth in both the residential and commercial sectors.

Slightly lower growth rates are expected in new housing starts in Eastern Europe over the next year, while Western Europe is likely to show stable to slightly declining development in construction activity as the German economy remains weak.

Dwelling activity in Australia is also expected to slow over the next year, but strengthened non-residential and infrastructure volumes, along with improved pricing, are expected to offset this decline. In the U.S., housing is expected to remain robust as interest rates stay relatively low, and demand for heavy building materials in the commercial and industrial sectors is also expected to grow as the overall economy strengthens. Construction in Asia is expected to continue as the economy improves further, leading to increased demand for brick in this region.

Editor's note:

The foregoing information was compiled from publicly available information in annual reports and news releases from companies listed in the 2003 Brick Giants (see http://www.ceramicindustry.com/FILES/HTML/CI_2003_CI_Giants/0,1067,,00.html).