These days, you can’t pick up any newspaper or magazine without seeing a headline about skyrocketing fuel costs and how this situation is affecting the economy, from consumers cutting back their non-essential purchases to companies downsizing to increase profitability. Because of their very high energy consumption, tile manufacturers are affected by the energy crisis even harder than other industries. On a global scale, this will drastically shift the balance of power among tile manufacturers, favoring up-and-coming producers and creating new challenges for Old World players.
For European manufacturers, increases in the cost of oil and natural gas will make their products even more expensive to export to the United States and other overseas markets. Faced with this dilemma, the most logical solution for these manufacturers is to shift production to these markets through capital investment. This is the approach that some of the larger Italian manufacturers have taken in the past few years, such as the Panaria Group’s acquisition and subsequent expansion of Florida Tile’s production capacity. Given the uncertainty of energy expenses for the foreseeable future, more companies will likely take this course in plotting future U.S. development.
On the other end of the energy spectrum, this energy crisis will likely favor manufacturers in countries with large energy reserves, such as Brazil and Turkey. As these manufacturers continue to upgrade their facilities with the latest manufacturing technology, they are able to create tiles that equal those of their European counterparts at a significantly lower price. More uncertain is how this situation will affect the juggernaut Chinese economy, which has to this point relied on lower production and transportation costs to be competitive in the world economy. If energy costs continue to rise, these expenses will rise accordingly, making it necessary to raise prices. While Italian ceramic manufacturers have been able to remain profitable by raising prices, this strategy will not likely work for the commodity products of the Chinese, so there is definitely a risk of losing market share. As energy prices to continue to set records, it will be interesting to see how tile manufacturers respond to the numerous challenges of today’s economy.
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