Market Overview and Forecast: U.S. Ceramic Market Sees Strong Growth in 2003
U.S. Tile Consumption Has More Than Doubled in Past DecadeDuring the past decade, ceramic tile consumption in the United States has more than doubled, from 1.18 billion square feet in 1993 to 2.87 billion square feet in 2003. During this period, only one year, 1995, saw a decline in tile consumption, and that rate of decline was less than one percent. This total for 2003 represents an overall increase of 8.76 percent over 2002, a figure well within the normal range for this time period. During this 10-year period, overall growth rates ranged from a high point of 16.19 percent for 2002 to a low point of -.87 percent for 1995.
The key factor in the strong growth of the U.S. ceramic tile market is the strong market for new home construction and remodeling, which have increased due to strong demand and historically low interest rates.
"Certainly the continued strength in homebuilding and new housing starts has helped to contribute to growth," said Rick Church, executive director of the Ceramic Tile Distributors Association (CTDA). "Remodeling was down a little bit, but we've seen from data from distributors an increase in remodeling."
Imports Continue to Gain Market ShareAnother important trend that is evident from the Department of Commerce data is that the percentage of tile that is imported into the United States has increased dramatically in the past decade, from just over half to more than three fourths. In 1993, imports accounted for 54.02 percent of total ceramic tile sales by volume. In 2003, that figure has increased to 77.63 percent. This trend of increasing export percentages is likely to increase, as U.S. companies face increasing pressure from overseas competitors that have much lower production costs. A prime example of this is China, which saw a dramatic increase of 71.8 percent over the previous year. Other foreign manufacturers that posted strong growth were Columbia, with an increase of 58.75 percent; Turkey posted a solid gain of 39.22 percent, moving past Indonesia, which had a solid gain of 19.44 percent. These increases in market share contrast those of top-ranked Italy, which posted a gain of 7.54 percent, slightly less than the overall average, and Spain, which lost just over 2 percent in market share.
Spain's loss of market share can be attributed to the increase in the exchange rate between the dollar and euro, which has reduced profits and increased operating costs for European manufacturers.
"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," said Rocamador Rubio, Director Ceramic Tile, Natural Stone & Building Materials, Trade Commission of Spain.
"Most of our companies increased prices very little in comparison with the decline of the dollar in terms of euros," Rubio added. "But the pressure from exports from countries with currencies with a positive exchange rate with the dollar was felt. Our manufacturers are-implementing different strategies to cope with the decline in their sales to the USA, including a change in product mix (more porcelain versus traditional stoneware floor tile), consolidation of companies, manufacturing in third countries, improving product design and adding more value to their product range."
"U.S. producer's market share slipped from 23 percent to 22.4 percent," said Bob Daniels, president of the Tile Council of North America (TCA). "However, since the market grew by over 8 percent, actual U.S. factory output increased by 3.42 percent. Despite the pressure from foreign manufacturers, Daniels believes that U.S. manufacturers can 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, full stock, and are generally cost competitive if they have a modern factory."
Brazil Becomes Third Largest Exporter to U.S. in 2003In terms of growth in market share, Brazil was the big winner in 2003, posting an enormous 23.45 percent increase in total U.S. exports over the previous year, a rate three times that of the overall group. 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 one percent over the previous year.
As might be expected, Brazilian manufacturers were highly enthusiastic about their U.S. sales figures for 2003.
"Sales have increased 14 percent during the last year," said Brian Streadbeck, president of Portobello. "This increase is due, in large part, to the launching of our architectural program," Stredbeck added.
Italy Still on Top of U.S. Tile MarketAlways the dominant force in the U.S. ceramic market, Italy remains the leading exporter of tile to the U.S., despite pressures from the increasing value of the euro in relation to the dollar, as well as increasing competition from other countries such as Brazil and China. Italy's overall market share in 2003 decreased slightly, less than one percent, but overall sales were up 8 percent from the previous year, slightly less than the overall combined average.
During the past decade, Italy's share of the U.S. ceramic tile market has remained remarkably consistent, never varying more than two percent from year to year; market share during this period has remained steady between 34 and 38 percent, even during the economic slump after 2001.
"The final official figures for 2003 showed an increase in exports of Italian ceramic tile to the U.S. in the order of 8 percent in quantity and 12 percent in dollar value," said Dr. Sergio Sassi, president of Assopiastrelle. "These are important results for Italy, since we already had the highest share of the market," Sassi added. "We have been able to continue the pace of our growth. This is a positive figure - reinforced by the fact that - when measuring the U.S. imports in value - 50 percent of the tile used comes from Italy."
Italian manufacturers doing business in the United States have found that sales for 2003 were very strong, despite fluctuating exchange rates.
"Our business has increased I think because of deeper market penetration and market awareness," said Jeanne Nichols, vice president of marketing, Granitifiandre. Nichols has found that the fluctuating exchange rates haven't had a noticeable impact on sales during the past year.
Forecast Bright for 2004Judging from growth rates over the past several years, and taking into account the continued strength of the U.S. housing market, it is safe to assume that ceramic tile sales will see an increase in 2004 similar to that of last year; manufacturers and industry experts concur.
"We have no official forecast but sales are reported to be doing well so far and another six-nine percent increase would not surprise me," Daniels said. "The U.S. economy is doing very well for building products," Daniels added. "Low interest rates and high demand are fueling this hot market."
"We have a positive outlook for 2004," said Church. "We hear different things from around the country. So far the year has been strong, and we look for that strength to continue."
"We think we're going to have a positive year with reasonable growth," said Svend Hovmand, president of TCA and Crossville. "Also, we're putting out new products like glass tile and metal tile so that adds to our program," he added. "Housing starts have gone up very well. There might be a flat year for housing starts sometime this year, but it will still remain at a relative high level. The commercial market seems to be coming back."
European ceramic tile manufacturers are also predicting a continued increase in sales, despite the difficulties cause by the decline of value of the dollar in comparison to the Euro.
"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," Sassi said. "Making a market projection in a troubling period like this one is particularly difficult, if not impossible, but according to our estimates the expansion of the overall consumption in the U.S. will grow at around 6 percent. Our object is to at least equal this expansion, trying, if possible, to do even better."
"We see significant opportunities to increase the speed of our growth," said Streadbeck of Portobello. "We believe that we can grow at rates two to three times the general market rate of growth," Streadbeck added. "This is due to the advanced integration of our factories in Brazil and our distribution system here in the U.S. We feel that the U.S. is the best market in the world for tile. The stable growth rates of construction, and the highly stable economy permit us to maintain consistent strategic plans. Even a recession of one to two percent doesn't require us to modify our strategic plans. This is a great place where the economy permits us to have steady double digit long term growth."
"Tile sales have increased for Keraben, because of the use of marketing tools, better service with four warehouses in the nation, and concessions to important distributors," said Oscar Zarzoso, comptroller for Keraben USA.
"Definitely porcelain tile demand has continued to grow," Church said. "Right now porcelain tiles are the rage. One reason certainly is their durability. It's certainly more and more widely used. Probably to some extent, marketing has overcome the perception of porcelain being too expensive."
With a solid growth rate of more than 8 percent for 2003, and a similar rate of growth anticipated for 2004, the U.S. ceramic tile market is experiencing a period of sustained and consistent growth, which will likely continue for many years.