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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.
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