Overall consumption of ceramic tile in the United States increased 1.8 percent in 2006 despite numerous economic challenges, according to the most recent data available from the U.S. Department of Commerce. This is a remarkable statistic, given that during this time period, the U.S. housing market ground to a near standstill, the dollar continued to lose value against foreign currency, and energy prices continued to set new records. This continued consumer demand for ceramic tile is testament to the outstanding designs and top-quality products brought to market this year.

As significant as this statistic is, it is only one facet of a more complex overall picture, as foreign and domestic tile producers fight for market share in an increasingly competitive market. This and other key factors are explained in detail in our annual ceramic tile State of the Industry Overview, which appears in this issue of TILE Magazine. One of the most remarkable statistics in this year’s overview is the dramatic growth in market share of Chinese manufacturers, which increased an amazing 53 percent versus the previous year, surpassing Spain as the fourth largest player in the U.S. market. This major grab of market share has dire implications for both foreign and domestic manufacturers, who must compete on an un-level playing field, in terms of manufacturing costs and exchange rate manipulation. The issue of unfavorable exchange rates has become a major thorn in the side of European manufacturers, as the ongoing weakening of the dollar versus the euro makes European tiles more expensive for American buyers.

Rather than sitting idle as they lose market share, Italian manufacturers have taken a proactive approach to the exchange rate issue, opting to shift manufacturing to domestic sources to reduce long-term production expenses. A key example of this approach is the Panaria Group’s recent opening of a state-of-the-art porcelain tile factory in Kentucky last month. The facility, which will produce porcelain tile lines for the group’s Florida Tile brand, represents a major step forward for both Florida Tile and Panaria Group. By shifting production to U.S. facilities, they not only reduce their long-term expenses, but also create goodwill in their community by bringing much-needed manufacturing jobs back to the United States. This approach has proven highly successful for Japanese auto manufacturers such as Toyota, and will likely be adopted by more foreign tile manufacturers in the future.

Rising production expenses, a declining housing market and a weakening dollar have made this a rather tumultuous year for the tile industry, which has held its own in spite of these adversities. If these factors continue unabated throughout 2007, it seems likely that the decade-long growth period of the industry will come to an end, at least temporarily.