Publication Info.

State of the Americas' Ceramic Tile Industry

Presented by Robert E. Daniels, Executive Director of TCA
(Posted November 2002)

United States Market: This is the largest ceramic tile importing country in the world with imports totaling over 1.7 billion square feet in 2001 and almost 1 billion square feet in the first half of 2002. Domestic output was near 600 million square feet in 2001 and over 335 million square feet in the first half of 2002, for total sales of 2.274 billion square feet in 2001 and nearly 1.3 billion square feet in the first half of 2001.

Overall the United States has suffered through a decline in all manufacturing starting in early 2001 and sluggish GNP growth through last year. In 2002 the GNP has grown 6.3% in the first quarter, 1.3% in the second, and 1.8% in the third for a total growth of 3% this year. However this is on the heels of negative growth for much of last year and an accompanied by an increase in unemployment to 5.7%.

Housing starts and sales have remained strong through this period. Prices have risen 51% since 1995 a number that is 32% higher than inflation as a whole. Investment in commercial buildings and structures is down 16% this year and consumer sentiment is declining. What this portends for the housing, remodeling, and eventually the ceramic tile market is uncertain. So far, low interest rates have kept housing affordable and a good buy but this could be a "housing bubble", especially on the east and west coasts.

Distribution Trends: There has been an accelerating tendency towards increased sales through "big box" stores. These stores seek out low-priced tile from anywhere in the world and essentially by-pass the traditional manufacturing and distribution systems. It appears that large retail suppliers such as Mannington, Shaw, Armstrong, and others are responding to this challenge by adopting the same strategy, which is to directly import their own product lines on a private-label basis. And then there is Mohawk that recently purchased DalTile forming a very large tile manufacturing and distribution organization.

This trend has brought lower cost tile to many more locations throughout the country and made it easier for the consumer to buy tile. This in itself may be the reason for the recent market growth. Ceramic tile is an excellent product that is poised to capture greater market share from other surfacing materials. The challenge to the traditional independent distributor is to offer additional value such as design service, job estimating, quality guarantees, access to installation, and product variety.

United States Manufacturing Trends: It is sad but true that a number of U.S. factories have ceased production in the past two years. This includes Winburn, KPT, Summitville's North Carolina factory, Mannington's Texas facility, and Tileworks, among others. Some of the factories may resume production but others will have their equipment liquidated and likely moved to offshore factories. Quite frankly low priced imports have made some of these factories non-competitive. And there has been a market shift away from quarry tile into unglazed porcelain. This combined with the drop in commercial building has put a damper on quarry tile sales. Those factories cannot readily convert to other type of tile production.

However a new highly automated factory has relatively low labor content and can be competitive anywhere in the world. If the factory is near a source of raw material, reasonably priced energy, and its market, it can be a formidable competitor. I believe that there will be an increase in production capacity in the United States in the next five years partially in response to increasing energy and related shipping costs.

Product Standards: Almost 20 years ago the tile producers around the world embarked on a program to standardize tile parameters through the International Standards Organization (ISO). The American National Standards Institute (ANSI) with its long history of developing voluntary and open standards has been a lynchpin in developing the ISO Standards. In fact ANSI holds the secretariat for the ISO committee TC-189 for ceramic tile and installation products. ANSI has delegated this to the Tile Council of America.

The result of years of effort is a set of standards that are useable anywhere in the world. Tile tested to these standards in one country can be assured to meet the standards of an importing country. It is now the goal of ANSI to harmonize the A137.1 tile standards with the ISO standards. Most of the work has been done but several areas are still under review. These are frost resistance, water absorption, and slip resistance. The most knotty specification is slip resistance and there may be no international standards in the measurement for some time to come. The problem may lie within the social and legal community, not the technical arena.

Recently the ISO committee has taken on the task of developing installation product standards. The grout, mortar, and backerboard materials are ready for final balloting and these will be followed by membrane standards. It should be noted that in ISO, each participating, tile-producing country has one vote.

Challenges to Growth: As in many other industries there has been a problem recruiting and training talent for the installation of ceramic tile. Construction trades in general do not have the respect of the public and young people entering the workforce are not choosing this as a career choice. This is despite higher than average wages with reasonably good work place environments. The tile industry that is targeting the U.S. market needs to use its resources to establish recruitment and training methods to support its own growth. Without trained and competent installers there is an unfinished product.

Competition from the Americas: There are some major producers in Mexico, Central and South America that are very large. Some of these have penetrated the United States market effectively and others have either chosen to target other markets or have not been effective marketers. Yet they are a significant threat to domestic U.S. producers. It is unlikely that these markets will open significantly to U.S. produced tile in the near future.