China experienced many difficulties in 2008, including a magnitude 8.0 earthquake in Wenchuan, resulting in tumbling home prices, and falling stock market indices. The financial crisis triggered by the U.S.A.’s subprime crisis in September has resounded throughout the world. The combined structural adjustment of the Chinese and world economy, investment and capital markets, real estate market and manufacturing industry have all had a negative impact on the Chinese ceramic tile and sanitary ware market.
The natural disasters of 2008 hit the industry hard. The summer Olympic games, which were not expected to bring a huge amount of business, brought forth an increase in the price of raw materials, labor, resources, and the appreciation of the Chinese currency (RMB).
Over the past 30 years, the world witnessed China’s growth in the ceramic tile and sanitary ware industry. From nothing to everything, from OEM to self-production, China has emerged as the world-manufacturing base with more than 50% of total world output of ceramic tile and sanitary ware. The first half of 2008 was not as profitable (when compared to a year-by-year basis), but it was the best sales period for 2008.
The changing point occurred in August when the overall sales within the industry dropped sharply - causing many companies to close their plants and reduce production lines. According to the statistics of China Building Ceramics & Sanitary Ware Association (CBCSA)’s initial survey in November, companies of Foshan and Jingjiang areas had closed one-third of their production lines compared to 2007 - the Shandong area closed one half; Faku and Linxi closed 10%-20%. For the sanitary ware companies, especially for the export-oriented, who have been strongly influenced by the world economic downturn, some saw a drop of 40% in total sales revenue, a signal for the coming worldwide recession.
Each company has its own production structure and target market. With more than 80% of China’s total production output being exported to the European and U.S. markets, the decline in demand of the products proved to be a major problem for sales and business operations.
For example, the Guangdong province dropped 10%, while the Hebei and Hunan provinces saw an increase in the single digits.
Due to successful international strategy, 80% of the total ceramic tile production output was now exported to Asia, Africa and other developing countries - leading Chinese companies to remain profitable.
All in all, the overall condition of the Chinese industry has fared better than other countries. According to statistics from 1,400 domestic companies, sales volume and profits are on the rise. The export volume adds up to 670 million - a 13.7% increase compared to 2007.
About the Author: China Tile & Sanitary Magazine (CTS) provided the above article, translated by Hann Xu.