TILE MARKET OVERVIEW: U.S. Tile Market Sees Continued Growth; Outlook Remains Positive
According to the U.S. Department of Commerce, U.S. sales of ceramic tile grew by 8.76% in 2003. The key reason was the strong market for new home construction and remodeling, which remained on an upswing in 2003 due to high demand and historically low interest rates. Harvard University's Joint Center for Housing Studies (JCHS) reported that starts of single-family homes stood at their highest level in over 40 years, while starts of multifamily housing edged up to 348,700 units on the strength of higher condominium production.1 Additionally, homeowners spent an estimated $130.4 billion remodeling their homes during 2003-a 7% increase from 2002 levels.2
Imports Edge HigherWhile these factors helped boost domestic tile production, imports also continued to rise. Of the 2.87 billion square feet of tile consumed in the U.S. in 2003, 77.6% was supplied by imports-a .6% increase compared to 2002 (see Figure 1). Imports from China saw the most dramatic increase at 71.8% over the previous year; however, the amount of tile imported from China remained below 60 million square feet, giving China just 3% of the total U.S. import market. Other foreign manufacturers that posted strong growth in U.S. imports were Columbia, with an increase of 58.75% to approximately 40 million square feet; Turkey, with a gain of 39.22% to a little over 100 million square feet; and Indonesia, with a gain of 19.44% to just under 100 million square feet. These increases contrast with those of top-ranked Italy, which posted a gain of 7.54% to nearly 750 million square feet, slightly less than the overall average, and Spain, which lost just over 2% to less than 400 million square feet.
"Ceramic tile exports from Spain to the United States fell in 2003 due mainly to the negative exchange rate between the dollar and the euro," explained Rocamador Rubio, director of Ceramic Tile, Natural Stone & Building Materials, Trade Commission of Spain.
Despite these figures, Italy and Spain maintained their leading positions in the U.S. market at 34% and 17%, respectively. However, both countries are keeping a close eye on Brazil, which posted a 23.45% gain in U.S. imports to just under 300 million square feet. This dramatic increase was enough to move Brazil into the third place position for the first time, ahead of long-time third place finisher Mexico, which gained slightly less than 1% over the previous year.
Although U.S. manufacturers' market share was reduced in percentage terms, overall sales figures did increase slightly compared to the previous year.
"U.S. producers' market share slipped from 23% to 22.4%," said Bob Daniels, executive director of the Tile Council of North America (TCA). "However, since the market grew by over 8%, actual U.S. factory output increased by 3.42%."
Innovation Boosts Market ShareWhile each manufacturer has a different strategy for the U.S. market, unifying themes seem to be an increased emphasis on porcelain tile and large-format tile, which are rapidly gaining in popularity.
"Porcelain tile demand has continued to grow," said Rick Church, executive director of the Ceramic Tile Distributors Association (CTDA). "One reason certainly is their durability. And probably to some extent, marketing has overcome the perception of porcelain being too expensive."
Dal-Tile's new porcelain tile plant in Muskogee, Okla., which was completed in 2003, was running at 85% capacity in July 2004, and the company said it planned to increase production of high-value porcelain tile in the new facility. Crossville, Inc., which is renowned for its Porcelain Stone® product line, constructed its newest plant in Crossville, Tenn., with the flexibility to expand and keep pace with process innovations and trends in porcelain tile design.
Laufen, which recently introduced a new line of double-pressed porcelain tile, is also seeing increased sales of larger sized tile. "There is a bigger demand for larger sizes," said Carlos Cortes, marketing director for Laufen. "We see shipments of tile ranging from 12 x 12 to 16 x 16 in.-and even larger than that, 18 x 18 and 20 x 20 in."
In addition to these trends, most manufacturers believe that innovation in both product lines and manufacturing processes is crucial to continued success in the highly competitive tile market.
"New manufacturing technologies continue to meet market demands for innovative products that can be used in unique ways to personalize residential and commercial installations," said Andrea Cacciari, vice president of distributor and Tecnica sales for American Marazzi Tile.
Judging from growth rates over the past several years, and taking into account the continued strength of the U.S. housing market, manufacturers and industry experts concur that ceramic tile sales will see an increase in 2004 similar to that of last year.
Forecast Remains Optimistic"We have no official forecast but sales are reported to be doing well so far, and another 6 to 9% increase would not surprise me," Daniels said. "The U.S. economy is doing very well for building products," he added. "Low interest rates and high demand are fueling this hot market."
In fact, despite growing concern over the pace of development, as well as rising interest rates, JCHS reports that housing construction over the next 10 years is likely to exceed that of the last 10 based on the Census Bureau 's population estimates, the growing demand for second homes and replacements of units lost from the stock.3 The commercial building sector has also begun to recover, which should help boost demand for tile even further.
"We expect to see continued growth," said Svend Hovmand, president of Crossville. "Housing starts have gone up very well, and we expect them to remain at a relatively high level. The commercial market also seems to be coming back."
Cacciari agrees. "Based on American Marazzi Tile's sales increase of 15% during the first five months of 2004, I'm optimistic that results for this year are going to be good. The economic and building climate seems stable, and demand for tile remains very high," he says.
Along with this increased potential, however, comes even greater competition from imports. "Our forecast for our sector in 2004 will be affected by three dynamic forces: our industry's commitment to increase our volume in this, the most important strategic foreign market for Italy; the dynamics of the American construction market; and difficulties caused by a weak dollar," said Sergio Sassi, president of Assopiastrelle, the Italian ceramic tile association. "According to our estimates, the expansion of the overall [tile] consumption in the U.S. will grow at around 6% [in 2004]. Our goal is to at least equal this expansion, trying, if possible, to do even better."
No doubt other countries have a similar goal in mind. But Daniels believes that U.S. manufacturers can continue to compete by emphasizing factors other than price.
"U.S. producers are not export-oriented at this time due to high worldwide capacity and low prices," Daniels said. "However, they have the advantage of local service, fast delivery and full stock, and are generally cost-competitive if they have a modern factory."
Editor's note: The foregoing article is based on excerpts from "Market Overview and Forecast: U.S. Ceramic Market Sees Strong Growth in 2003," by John Moore, Editor, and Mike Chmielecki, Editorial Assistant, TILE Magazine, June 2004, with updates by Christine L. Grahl, Editor, Ceramic Industry. A complete copy of the TILE Magazine article, including figures with comprehensive data, can be found at http://www.tilemagonline.com .
SIDEBAR - Ceramic Tile: A Global Overview
- Brazil. With 2003 tile production of more than 534 million square meters (~5.8 billion square feet, up 5.1% over 2002 levels) and exports of over 103 million square meters (+40.1%), Brazil has established itself as a major competitive force in the global tile industry. North America is its largest export market at approximately 50% (41% of which went to the U.S. in 2003), with South Africa (6%) and Chile (5%) following at a distance second and third place. In 2004, Brazil's tile production is expected to increase an additional 5% to 560 million square meters, with exports up 20% to 124.2 million square meters.1
- China. A market survey of the Chinese ceramic tile and sanitaryware industry, conducted by Beijing Topview Consulting & Trading of Peking and published by the Italian Trade Commission (ICE) and ACIMAC, reported that Chinese ceramic production in 2002 increased 13.3% over 2001 levels, with almost half of the increase generated by the tile industry. The report, titled "Ceramic Production in the People's Republic of China," says that the Chinese market is extremely fragmented, with hundreds of small companies accounting for 54% of all tile production.2 While China's exports are growing, as evidenced by the nearly 72% jump in exports of ceramic tile to the U.S., the Chinese market is also seeing an increased domestic demand for ceramic building products, which could help boost the country's imports. Approximately 500 million square meters (~5.4 billion square feet) of new housing is built in China every year, which increases the demand for interior products such as ceramic tile. Although almost all of the country's demand continues to be filled through domestic production, imports are rising and reached 1.84 million square meters (~19.8 million square feet) in 2002. Growing urbanization, the development of cities with new residential districts and prestigious business centers are reportedly fueling demand for high-quality products that local companies are unable to provide.3
- Italy. With a global market share of 35% and exports of 71%, Italy is one of the world's leading producers of ceramic tile. According to the Italian ceramic tile association Assopiastrelle, the Italian ceramic tile sector produced 603.4 million square meters (~6.5 billion square feet) in 2003, a slight decline (-0.3%) from the 605.5 million square meters produced in 2002. Total sales reached 588 million square meters, down 3.4% from 2002. The greatest decline was in exports, which fell by 4.6% to 417.6 million square meters. The only growth market was in exports to the U.S., Italy's leading trading partner, which increased nearly 8%. Demand in Italy's domestic tile market fell 0.2% to 170.4 million square meters (~1.8 billion square feet). Turnover was a reported 5.2 billion euros (down 2.4% from 2002 levels), with 3.8 billion euros (-3.1%) originating from exports and 1.4 billion euros (-0.2%) coming from Italy's domestic market.4
- Mexico. According to the Mexican company Grupo Industrial Saltillo, the Mexican ceramic tile market is valued at approximately US$809 million in 2004 and has grown at a 10% compound annual growth rate (CAGR) for the past four years. The market is expected to continue growing at an average of 10 to 11% over the next three years, driven by Mexico's huge pent-up demand in housing, remodeling, the availability of mortgages and fiscal reform.5
- Spain. According to ASCER, the Spanish ceramic tile manufacturers' association, the value of exports fell by 5.8% in 2003 to 1.9 billion euros. However, the third quarter of the year saw a smaller downturn than the first two quarters (-6% compared to -8.4% in the first quarter and -8.3% in the second). The European Union remains the main destination for Spanish ceramic tile, at 41.5% of the country's total exports in the first three quarters of 2003. The top markets during that period were France (+6.3%), the UK (+0.2%) and Portugal (in spite of a 15.9% downturn in 2003). Germany was showing a recovery with a 3.7% increase in sales. Increased exports to Eastern European countries (+5.3%) compensated for the slight overall downturn in the EU (-1.4%). Russia in particular showed a 7% increase with additional potential for expansion. Exports to Africa also increased, up 7.7% from the same period in 2002. However, Spanish tile producers saw declines in exports to other regions, including the U.S. (-2% for all of 2003), South America (-29%) Asia (-17%) and the Middle East (-20%).6
- Turkey. Of the country's 250 million square meters (~2.7 billion square feet) of tile production capacity in 2002, a reported 70 million square meters (~753 million square feet) were exported. The majority (48%) of exports were to countries within the European Union, while 23% were to North America.7
- Other Regions. According to ACIMAC (the Association of Italian Manufacturers of Machinery and Equipment for Ceramics), the Middle East has shown uninterrupted growth since 1999 and for the past two years has been the second largest export market for Italian ceramic production machinery (primarily for tile), accounting for 18.6% of total exports. The country with the highest demand for Italian technology in this area is Iran, where the ceramic industry has doubled tile production over the last five years. The third largest export market is Asia (excluding China), where 2003 brought an 8.7% increase in sales to a total of 143.9 million euros following a downturn in 2002. Demand for ceramic tile production plants from Eastern European countries also remains very strong, in spite of a fall in 2003 (down 15.4% to a value of 108 million euros). ACIMAC noted that this drop was anticipated after five years of steady growth in investments in the ceramic industry, particularly in Russia and Poland, two countries that have seen a sharp rise in tile production. ACIMAC also reported a continuing growth trend for exports of ceramic production machinery to Africa (up 24.2% in 2003 to a total of 93.1 million euros).8
Editor's note: Every effort was made to obtain current data for the countries listed above; however, in some cases, 2002 data were the latest available.
References (for sidebar)1. Anfacer, http://www.anfacer.org.br .
3. Ceramic World Web, http://www.ceramicworldweb.it .
4. Ceramic World Web, http://www.ceramicworldweb.it .
5. Grupo Industrial Saltillo, http://www.gis.com.mx .
6. Ceramic World Web, http://www.ceramicworldweb.it .
7. Turkish Ceramics, http://www.turkisceramics.com .
8. ACIMAC, http://www.acimac.it .