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For that reason, we decided to compile our first ever Raw Materials Round Table. The opinions and ideas presented here are just that—they’re not based on statistics or detailed analyses of the various raw materials markets. What they are based on is solid experience—experience in the fields that each of these suppliers knows best. Through their opinions and ideas, we can gain a greater glimpse into the world of raw materials and the impact these raw materials have on ceramic manufacturers today and into the future.
What are some of the most recent innovations in raw materials (products, processing techniques, etc.), and how do they affect ceramic manufacturers?A. Kenneth Bougher, Director of International Sales, Clayworld: As a general rule, the raw materials industry is not a dynamically changing industry. The response to change frequently comes through process requirements that require a reevaluation of materials currently available and used by industry. The ball clay producing industry continues to focus on refined product (i.e., slurry) and fine tuning the product to the application. Some companies have also begun expanding into non-clay products; for instance, Clayworld now offers an iron-bearing nepheline syenite that has an established record of performance in the gres tile industry. This product can also be used in the sanitaryware industry as an auxiliary flux in combination with feldspar. The cost savings is substantial, permitting a reduced raw material cost outlay. Progress is slow, as the industry must evaluate aesthetic issues, but once the benefits are accepted, then size reduction concerns will need to be addressed. The gres tile industry has already expanded consumption as many of those plants have grinding equipment in place. Very substantial quantities of the product exist with high uniformity, so this product will continue to be a focal point. Cost versus effect benefits will be the continuing criteria that manufacturers will need to consider when it comes to innovative products and processes.
John Pennington, General Manager ECC International, Imerys, Global Sanitaryware Division: In sanitaryware, the most recent innovations have been developments attached to pressure casting and other improved casting methods, as well as the move toward faster firing. As manufacturing trends have moved into these areas, we’ve been able to provide raw materials that improve the performance of sanitaryware manufacturing.
Bill Weidman, Sr. Vice President, Kentucky-Tennessee Clay Co. (an operating unit of Imerys): Over the last few years we’ve been focusing on better selection and tighter control of process variables. Additionally, specifications have gotten more precise—we’re measuring more things than we ever have. These changes are leading to less variation in the raw materials that we ship to our customers, which also leads to fewer problems in manufacturing.
John Torbic, Vice President Inorganic Salts, OMG Worldwide: In the advanced ceramics markets, recent innovations are mainly in the electronics area where materials such as varistors and thermistors are providing improved performance for today’s applications.
Randy Johnson, Vice President – Minerals Sales, R. T. Vanderbilt Inc.: The biggest issue in this industry is controlling costs, so we’re always trying to cut prices and save our customers money so that they’re better able to compete against imports. We’ve made processing changes in our operation to help ensure that we deliver a first-quality product while keeping our raw material costs down, so that there aren’t a lot of price increases hitting our customers. For example, we’ve recently invested in some new and larger crushing equipment, which makes hard rock processing more efficient.
Other changes in raw materials include a move toward super sacks, which have allowed manufacturers to get rid of paper bags and avoid filling landfills with disposable paper bags. Additionally, more and more people are looking at going to bulk, and the trucking industry has accommodated those needs by providing more bulk trucks. The railroad also has gone through much consolidation and is working on their delivery and service, too.
Martin Stentiford, Technical Services Manager, The WBB Group: Suppliers have developed niche products for process-specific applications that might require smaller volumes or higher values, and we’ve also begun customizing products for individual customers. Many suppliers have moved toward offering “one-stop, whole clay solutions,” such as ball/china clay blends. We’re also looking toward developing more economic extraction techniques to control our costs.
Bill Rogers, Vice President-Sales/Marketing, Zemex Corp.: The technologies associated with beneficiation of feldspars and silicas, and even the way that we process kaolin clay and talc and other materials, haven’t really changed. There have, however, been some new manufacturing trends. A number of companies, mostly in the tile industry, have begun to decide that they want to buy materials in the crudest form they can and process it themselves in the course of doing their body preparation work; in other words, they’re buying granular feldspar instead of ground and shredded clay instead of air-floated. They feel that they can save enough money on the lower processing stage of the materials that they buy and justify spending a lot more money on capital. I think that’s backwards. Why not save the half a million to a million dollars in capital and buy already processed goods?
How have the standards for quality and consistency of raw materials changed over the past several decades, and what has driven this change?Bougher (Clayworld): The ball clay industry’s raw material base is finite deposits of diverse varieties. Early mining procedures focused little on the tested quality of the deposits and, as a result, the clays were high graded with little concern as to the full use of the available stratas. When demand escalated on key grades, it forced the clay producers to extend the life of the deposit, as well as control costs through full employment of the available selections. This latter step has had a major impact on the consistency of clay products for an established period of time. More recently, the adoption of SPC [statistical process control] methods by the ceramic manufacturers has required a focus on clay consistency. Concentrating on the full use of clay reserves and meeting the demands of manufacturing process control have been two important events driving the standards of quality and consistency.
Pennington (ECC): In part, the demands from the manufacturers have driven these changes (new manufacturing processes, etc.). But at the same time, accreditation to standards like ISO 9002 have meant that quality systems have had to be put in place so that the end user can see that their raw material producers don’t just have a “quality image”—they can actually see what is being done. There is obviously an ongoing demand on the part of the raw materials suppliers to produce more consistent raw materials, notwithstanding the fact that we are dealing with a naturally occurring raw material.
Weidman (K-T Clay): The standards have become more stringent—higher levels of testing are required. A lot of it is driven by the different processes that we see coming through, such as pressure casting and faster firing cycles. We’re also measuring characteristics such as carbon and sulphur content, as well as particle packing indices and other parameters that will improve raw material performance.
Torbic (OMG): Today’s applications require a more customized/fine product. As a result, there has been a reduction of trace elements for improved purity and a more finely controlled particle distribution.
Johnson (R. T. Vanderbilt): With computers and e-mail in this information age, everyone wants more information. As a result, we’re generating more information. We’re doing more testing, providing more quality control and tracing products made lot to lot to make sure we provide the consistency that everyone is looking for.
Dr. Graham Lawson, Chief Executive Officer, The WBB Group: Quality standards have increased for numerous reasons. There has been a geographical shift of some ceramic production sectors (sanitaryware and tableware, for example) from the mature markets of Western Europe and the U.S. toward Eastern Europe, Asia and South America. There has also been a replacement of some production in mature markets by outsourcing to lower-cost regions. Industry consolidation, particularly (but not only) in the sanitaryware industry, and increased price pressures on ceramic manufacturers have also become major issues. Other trends include an increased technical competency on the part of ceramic manufacturers based on process engineering (automation, process control, etc.) with a concurrent loss in competency in in-house ceramic technology; an increased focus on customers in core businesses (product design and manufacture, and marketing); a lower value placed on the technical qualities of raw materials; and increasing environmental pressure on ceramic manufacturers (reduced emissions, waste, energy consumption, toxic oxides in glazes, etc.). Additionally there have been early signs of a trend away from buying and processing raw materials towards the purchase of more complex blends of processed minerals and complete bodies.
While such trends present opportunities for suppliers to take proactive steps to make positive changes, they also present threats to raw material suppliers who are not prepared to change. Demands are increasing for more closely specified materials delivered with increasing levels of consistency within the specified parameters. Additionally, the loss of ceramic expertise and craft has reduced the in-house ability of many ceramic manufacturers to modify processes (and the specificity of the process itself) to accommodate the “natural variation” inherent in raw materials.
Rogers (Zemex): The technology in testing and quality control is getting to be a lot better. Twenty years ago we didn’t have surface area analyzers and sedigraphs and the other equipment that has really improved our ability to characterize some of the materials that are in the marketplace.
Many suppliers have become or are in the process of becoming certified to ISO standards. What does this mean for ceramic manufacturers?Bougher (Clayworld): To the manufacturer and consumer of the raw material products, this means that the supplier has documented procedures intact and that the product is traceable throughout the process until it reaches the consumer. The certifying body evaluates the certification annually, and this should provide protective assurance to the consumer.
Pennington (ECC): We believe it gives our customers a lot more confidence to know that they’re dealing with a company that has an auditable quality system in place. They can come and see exactly what we’re doing, and know that we have to conform to the inspector’s requirements and keep our systems up to date and assured to the quality system to which we are certified.
Weidman (K-T Clay): Manufacturers will see more consistency in their product quality, but they’ll also get better service. The focus of ISO is on the total process—not just the process of making the product and testing, but also customer service, accounting and all aspects of how we do business. It means a lot more paperwork, but we see some benefits internally in terms of having more consistent processes and our workers having a better understanding of our processes and our customers’ requirements.
Johnson (R. T. Vanderbilt): Becoming certified to the ISO standards is a labor-intensive process for any company, but it will have a positive effect for our customers in the long-term as a result of intensive monitoring and control of processes and the generation of quality control data in every step of our operations.
Stentiford (WBB): Most of our (European) customers are ISO 9000 certified and have been for many years. Such systems place demands upon them and on us as suppliers to agree to specifications, maintain them, and allow free access to our customers to audit our systems and processes. This drives us to be vigilant and rigorous in our application of our systems, as well as to ensure that those systems are ones that best reflect our needs and the needs of our customers. Many companies are also pursuing certification to ISO 14000 (environmental) standards, and these will also affect the ways in which we manage our processes and products. There will be a move to integrate ISO 9000 and ISO 14000 procedures to avoid conflicts and promote synergy.
Rogers (Zemex): We’re in the process of getting each of our plants certified to ISO 9002. I’m not sure that it’s going to have an impact on the quality of the materials that we produce, but I think it’s going to make us more efficient, and I think that it’s going to enable us to offer products that are more consistent over a long period of time. Becoming certified to the ISO standards provides an opportunity to really review what we do and why we do it. It gives us an opportunity to quit doing things that don’t add value and to add things that improve the process in the long-term. And this will help us keep the cost of our products down.
What are some of the biggest challenges ceramic manufacturers currently face in terms of raw materials, and what are suppliers doing to address those challenges?Bougher (Clayworld): Costs of processing the raw materials and the cost of transportation are important issues influencing manufacturing. However, the real cost of raw materials must be evaluated in view of the benefits associated with the product. If a more costly raw material product can reduce defects and improve yields and productivity, then obviously it is less expensive in the long run. Likewise, if a lower cost raw material product appears to meet the criteria of the intended use, then it should be considered on those merits. Reputable and established raw material producers have maintained qualified staff to serve the customer base. To maintain and improve communications, manufacturing concerns should involve management, technical and purchasing personnel to make the correct raw material decisions.
Pennington (ECC): Any manufacturer would probably give you a different answer to that question. It depends on where they are. In Western Europe and North America, some of the biggest challenges that are being faced are the supply of goods from lower-labor-cost areas. The world now is a much smaller place than it was many years ago. Twenty-five years ago, the thought of bringing sanitaryware into Europe or North America from China seemed impossible—but today it is happening. As a result, all manufacturers have to keep their costs down so that they can retain their competitive edge in a worldwide market. But of course there’s no use in manufacturers moving toward lower-labor-cost areas if the necessary raw materials are not available. So the raw materials suppliers have to be in a position to satisfy this ever-moving market from locally sourced raw materials. That is a challenge because we don’t control where the sanitaryware manufacturers go, and we can’t always guarantee that there are going to be raw materials there. But what we try to do is move ahead of the market; in other words, we want to be in a position to anticipate where raw materials will be required and be in a position to supply them, as well as provide materials that deliver improved performance and efficiency benefits to the manufacturers. We can’t simply follow—we have to lead. That’s what we are doing and intend to keep doing.
Weidman (K-T Clay): Manufacturers are competing with other producers in other parts of the world who have much lower labor costs. To remain competitive, domestic manufacturers need to find ways to keep their total costs down. As suppliers, our goal is to give manufacturers better and more consistent raw materials to help them remain competitive in terms of product quality. We also provide technical service to assist in improving production efficiencies and yields. We believe this is an effective and long-term method to reduce costs.
Torbic (OMG): One of the major challenges of today is ensuring that products are supplied in the quality required. This is especially challenging when resources come from a developing country.
Johnson (R. T. Vanderbilt): The critical issues for most companies are energy costs, transportation costs, government regulations and foreign imports. Labor is also a problem in some areas, but the way the economy is going that might not be a problem for long. Raw material suppliers are continually seeking cost saving measures in processing and modes of transportation, and providing input to government agencies to try to avoid unnecessary regulations.
Stentiford (WBB): The ceramic industry is shifting its manufacturing base to low-labor-cost markets, and suppliers must adopt the appropriate strategies to manage this. These strategies include possible acquisitions of “local” raw material sources to which developed production and control techniques are applied, as well as importing high value materials from existing production areas to supplement local supplies. Such imports can provide technical properties that are not available in local materials but are essential to the needs of the local ceramic industry. On-site management of the customer’s raw material preparation and/or the establishment of regional refining plants to satisfy the needs of localized “clusters’” of industry may also be required.
Rogers (Zemex): One of the biggest concerns is the continued regulation of mining. We have very large, permitted areas with large reserves—most of our mines have been around for years and will be in operation for decades to come. But it’s going to be difficult for some companies to find good quality reserves that can be permitted and exploited. On the manufacturing end, however, the high cost of labor and increasing energy prices are really the biggest challenges. Materials, comparatively speaking, are about third or fourth down the list.
Are raw material prices likely to increase this year? If yes, by how much, and what factors affect these increases?Bougher (Clayworld): Prices have increased this year on an average of 5% for ball clays. Factors impacting the cost of production include energy and escalated costs of labor benefits.
Pennington (ECC): Yes, raw material prices are increasing on a global basis. This reflects the economy in some ways, but there are other factors as well. Environmental issues are playing a much bigger role, and we’re also seeing very large increases in energy costs. These issues impact our business, and we have to recover some of these costs from our customers. At the same time, we are maximizing our cost-saving efforts in all aspects of the business, from constantly challenging our processes to how we source our heat and power. But at some point we get to the stage where we need a contribution from our customers. That contribution in no way covers our cost increases, but we also understand that our customers, the sanitaryware manufacturers, are dealing with some of these same issues themselves. So we’re trying to work with them to identify opportunities that are mutually beneficial.
Weidman (K-T Clay): Like any other manufacturer, we’re challenged with high energy and labor costs, environmental and safety regulations, health care, and other cost-related manufacturing issues. We’ve seen both energy surcharges and price increases as a result.
Johnson (R. T. Vanderbilt): Raw material prices have gone up some already due to the high energy costs, and there will be some additional movement in pricing this year. Everybody’s trying to hold their costs, but the price of energy is going to prevent them from holding costs forever. The raw material suppliers are getting hit with the same energy costs that our customers are getting hit with, and it’s tough. We’ve actually made adjustments in our production schedules to try to offset some of these cost increases. We’ve installed some new crushing equipment to give us more efficiency. We’ve updated our handling systems so we don’t have any waste and spillage, and we’ve restructured a lot of our operations to try to do more with less. But even on the supply side we have to meet government regulations, and we’re not immune from the energy crunch.
Lawson (WBB): For the last three to five years, prices have remained stable. But they are likely to increase by around 7.5% this year due to increased energy costs and environmental regulations, as well as general inflation.
Rogers (Zemex): On an inflation-adjusted basis, the feldspar and other products that we produce today cost only a fraction of what they did back in the 1950s, so there’s really not a whole lot of margin there. We survive on volume. I just don’t see any way possible for anybody in the industrial minerals business to operate and not have incremental price increases on a regular basis. We’ve got tremendous regulatory burdens, we’ve got our cost of operations, general inflation, energy costs—all these things work together. We’ve got nature as our major supplier, and all the things that we buy one way or another wind up being either petroleum-based or having a significant petroleum impact. Price increases are inevitable.
Over the past several years, numerous mergers and acquisitions have consolidated the materials industry. What effect will this have on ceramic manufacturers?Bougher (Clayworld): One strong benefit of mergers is that they have the potential of supplementing the reserve of material and expanding the managerial resources. This should benefit the manufacturing sector over the long term. The negative aspect is that prices have the potential of escalating rapidly, especially when a very competitive situation has existed over time. This can harshly impact the consumer in the short term and require quick adjustments to compensate. However, the merger and acquisition scenario should insure strong and healthy supplies of raw material that will be a long-term benefit to the industry in general.
Pennington (ECC): Imerys recognizes that it needs to have a global presence in order to compete in a global marketplace and serve customers who are also consolidating and expanding globally. The number of recent acquisitions starts to fulfill that aim. Our customers can only benefit as Imerys brings its technical strength and group synergies to the worldwide market. This means that customers can rely on Imerys to give them value for their money while providing quality materials where they are required.
Weidman (K-T Clay): It’s essentially survival of the fittest. I think down the road they [the manufacturers] will end up dealing with healthier companies, but while the quality will continue to get better, you’ll also have to pay for that quality. At some point there’s a trade-off. Prices have been pretty stable the past 10-12 years, and in real dollar terms, we’re selling products now for considerably less than we were selling them when I first came to K-T Clay. But that trend can’t continue, and that’s one of the reasons that the supplier base market is consolidating.
Torbic (OMG): Fewer suppliers are ultimately providing a larger selection of products. This is ideal for ceramic manufacturers because by decreasing the number of suppliers they need to deal with, they decrease their costs.
Lawson (WBB): The mergers and acquisitions should allow raw material suppliers to offer complete solutions from an even broader portfolio of products. Ceramic suppliers should see reduced transactional costs due to dealing with less people/organizations, and there should also be closer working relationships and more joint developments. Other potential benefits include the creation of “one-stop shops” for raw materials, which eases purchasing and procurement demands; full knowledge of component materials is centrally available, making technical and commercial servicing much more seamless; and better control possibilities for inventory.
Rogers (Zemex): Consolidation on both the manufacturing and supply sides in the ceramic industry are responses to today’s markets. To drive down fixed costs, you have to get bigger. With regulatory burdens and other challenges, small companies are going to have a hard time surviving. There is a risk of becoming too large and being unable to provide the more individualized quality products and services that a lot of people in our industry have really come to expect. But small suppliers are under a lot of pressure from a profitability standpoint because their costs are going up and their pricing isn’t going anywhere—and may even be going down. About the only way these companies can survive is to partner with somebody.
Does your company currently participate in an e-procurement forum (Quadrem, CeramicSources, etc.), where ceramic manufacturers and other materials users can buy your products online? If not, do you have plans to participate in e-procurement in the future? Why/why not?Bougher (Clayworld): Old Hickory Clay Co. and the marketing division of Clayworld do not currently have e-procurement. However, we are investigating this option as equipment and communication trends continue to move in this direction.
Pennington (ECC): Yes—we have joined the Quadrem marketplace, but only just at the end of 2000. We believe it will bring significant benefits to the industry, but it is too early to quantify the full extent of the benefits to Imerys.
Weidman (K-T Clay): We had discussed it internally, but it never really became a major strategic issue for us before we became part of Imerys. Of course, now that we’re part of a bigger group we’ll join whatever effort they’re making. We already do some things electronically with some of our large customers in terms of certificates of analysis and things like that to try to reduce paperwork. But we haven’t really taken it to the e-commerce level.
Torbic (OMG): OMG is not pursuing e-procurement at this time. Performance issues require customized products, and a close working relationship with our customers is needed to develop each product.
Johnson (R. T. Vanderbilt): E-commerce is already a reality at R.T. Vanderbilt Co. Our new website is constantly under renovation, and we have a lot of customers that are signing up, getting a PIN code and getting registered on our system so that they can check availability and place and track orders electronically. This format is really helping the smaller companies that don’t have a staff of people to do the work for them. We’re constantly holding meetings to review and determine how to best upgrade our system to meet our customers’ needs.
Lawson (WBB): We don’t currently participate in e-commerce or e-procurement, but this is something we are looking at.
Rogers (Zemex): While we haven’t been involved in electronic commerce on the ceramic side of the business, we have had some experience with online auctions. But we haven’t really felt the need up to this point to have an e-commerce site because people can call, fax, or even e-mail us, and that’s how they want to do business with us.
While e-procurement and e-commerce forums provide a way for ceramic manufacturers to identify other potential suppliers on a global basis, you have to consider where the material is coming from and what risks you might encounter, such as the potential for quality problems. All feldspars are not created equal, and what you’re looking for is large, consistent supplies of materials that will fit your manufacturing process. If our customers tell us that this is the way they want to do business, then of course, we’ll give them what they want. But you can really be penny-wise and pound-foolish when it comes to raw materials. What I mean by that is if you do business with a supplier, that supplier will learn what’s important to you as a consumer and can tailor their products to your needs. If you’re specifying those products online as a commodity, it will be difficult to get that kind of customization.
What other issues are currently affecting raw material suppliers that will affect ceramic manufacturers downstream?Bougher (Clayworld): Two issues of major importance that affect raw material suppliers and, in turn, manufacturers are regulatory efforts and the influence of developing raw material deposits in other parts of the world. Regulatory efforts have the potential of eliminating important sources of raw materials and making it difficult to find other approved substitutes. These may, in some cases, alter production processes either negatively or positively, but nevertheless, it impacts the ceramic manufacturer. The investigations and efforts needed to address these concerns result in higher costs for the supplier, which impacts the total product cost.
Additionally, raw material sources that have been developed in other parts of the world are increasing the competition in the manufacturing sector. This will continue as low-cost regions enter into production. For domestic ceramic product manufacturers, the quality of products versus cost and productivity will play a major role in market position. Partnerships between the raw material producer and ceramic product manufacturer should be a focal point.
Pennington (ECC): The two biggest issues are increasing legislation and the environment. One common factor wherever we produce our clays and kaolins is that the production processes generate waste in varying degrees. That waste has to be disposed of—and the environmentalists are making it increasingly difficult to obtain tipping land where we would like it, adding unavoidable costs to the process. These issues are very prevalent in the UK and Europe, and are becoming more so across the world. The manufacturers need to recognize the value of the materials and the increasing complexity we have to endure to supply them.
Weidman (K-T Clay): Aside from the consolidation and the globalization issues, one of the things I’ve noticed is that we’re all doing more with fewer people. There just don’t seem to be that many people in traditional ceramic companies ready to step into the next role. One of the major challenges for all of us will be to attract and retain talent.
Another serious issue we all face is that of government regulation. If environmental compliance and regulations continue to grow, along with proposed legislation for workplace ergonomics and clean air regulations, it will be more difficult to comply and maintain cost control. We’re quite willing to remain compliant and provide a safe and healthy working environment, but over the last 10 years it’s become more and more difficult to deal with all the regulations and the litigious nature of our society. At K-T, we have an excellent track record in terms of our lost-time accident program and our environmental compliance record, but I know how many resources we have to put into these programs to maintain them, and it’s a daily challenge.
Torbic (OMG): New and increased applications are requiring new developments to satisfy performance needs.
Johnson (R. T. Vanderbilt): Government regulations, energy costs and transportation are really the three key factors.
Lawson (WBB): Most of these issues are covered above. The ceramics producer and the raw material supplier are inextricably linked. This is a longstanding and special relationship, but right now that relationship is under severe pressure. Ceramics producers are being pushed by global market and environmental forces outside their control to reduce costs, both by productivity measures and by downward pressure on raw material prices. Ultimately, these two measures cannot be sustained because cheaper raw materials will reduce productivity.
The commoditization of raw materials leads to a reduction in quality, lower investment in their production processes and a lack of exploration for new sources. This satisfies no one. But equally, simply increasing the price of raw materials satisfies no one. The answer to this dilemma must be in achieving a win-win situation where both parties benefit. This will come from a closer relationship between supplier and customer, not a more distant one. But within this closer relationship, the specific challenge for the raw material supplier in the 21st century will be to understand specifically what problems face the ceramics industry and then provide products and services that contribute to their solution.
Rogers (Zemex): Environmental issues, legislation and energy costs—these are really the big issues. These things make us less competitive globally and add to the pricing pressures.