Tile boom cracks

By Alex Feytis
Published: Monday, 26 April 2010

After many prosperous years, the ceramic tile industry saw its first real slowdown in 2008. Asia and the Middle East now lead the way to recovery, while Europe and the USA remain sluggish

The ceramic tile industry, a primary consumer of industrial minerals, produced 8,495m.m2 in 2008 (see Ceramic tiles at a glance). Depending principally on the construction industry, it comes as no surprise that it was severely impacted by the financial crisis. As a consequence, the last two years have been quite difficult for the industry, 2008 being the first real slowdown in the world tile industry after the golden times of late 90s and early 2000s.

Global exports data are revealing. In 2008, ceramic tile world exports grew by just 0.47%, a worrying figure for the industry compared to the +8% of the previous years.

The year 2009 did not show much improvement either. “It was the worst year in the history of the ceramic industry”, Pietro Cassani, chairman of the Association of Italian Manufacturers of Machinery and Equipment for Ceramics (Acimac), described to IM (see interview p.36).

“The current economic crisis has had a significant impact on the ceramic tile industry. Production levels and sales figures in dominant manufacturing countries such as China, Italy and Spain have been influenced by the financial crisis and the downturn in the property markets, predominantly in the USA, Spain and the UK where the effects of the downturn made such an impression,” David PortalŽs Ma–an—s from Ascer said.

As Zeynep Bodur Okyay, president of Kale Group and of the Turkish Ceramic Federation, explained to IM, the ceramics industry in Europe fell down. Spain was the leading ceramics country in this fall, sales in Italy decreased a lot and Turkey was therefore affected from the situation, the European countries being its main target markets. “In some countries, the decrease of ceramics output during the last two years reached up to 40%. The position of Turkey was not so drastic but we also lost some 20-25 % of our production,” she said.

One of the new trends is that North African and Middle East countries may become important suppliers of European countries who want to substitute their manufacturing position in the near future owing to low cost of labour and energy resources.

Italy “badly affected”

Italy, the world’s third largest producer and second largest exporter, saw an 8.3% fall in production to 512.5m.m2. “Like all advanced economies, Italy has been badly affected by the downturn,” Acimac’s chairman Pietro Cassani explained to IM.

Italian ceramic manufacturers exporting around 70% of their output to the main world markets, principally the USA, have seen their production fall considerably since the beginning of the financial crisis. Total sales of ceramic tile dropped by 7.7% in 2008 from 547 to 506m.m2 of which 151m.m2 were sold in Italy and 355m.m2 were exported, a 6.4% drop compared to 2007.

“However, the Italian producers’ role as the world trend-setter has been unaffected, as has the high technical quality of their products due to the strength and vitality of a national industry that is ready to take on the new challenges posed by the changed international situation,” Cassani said.

According to Acimac, the fall in exports is mainly attributable to the dramatic decrease in sales in the USA (-26%) and Europe, particularly Germany (-8.2%), France (-3.4%), Latvia (-36.8%), Ireland (-34.7%), Estonia (-23.7%), Spain (-22.9%) and the UK (-17.1%).

By contrast, sales increased in the rest of Europe such as in Portugal (+62.2%), Poland (+22.9), Slovakia (+13.2%), and Russia (+3.9%) in addition to Asia (+7.9%) and Africa (+7.4%).

The 3.1% increase in average selling price in addition to the combined result of a 2.1% increase in Italy and a 3.3% increase abroad “helped to limit the fall in turnover to -4.6% compared to 2007” explained the Italian organisation.

Spanish sales 29% down

Spain, the world’s fourth largest ceramic tile manufacturer and the third exporter, saw the biggest drop in production (-15.3%) in 2008 among the top 15 producers (see World top 15 ceramic tile manufacturers). According to Ascer, the industry accounts for 1.2% of total exports. Spain also accounts for 38% of total ceramic tile production in the EU-27 countries, 16.2% of global output being exported. Spain’s main export markets are Europe (62%), the Middle East, North America (5.6%), South East Asia (3.1%), Central America (1.9%) and South America (1.6%).

Acimac reported that in 2008, Spain’s increase in average export selling price from Û6.9/m.m2 to Û7.23/m.m2 limited the fall in export turnover to -3.7%, corresponding to a total of Û2,200m. The fall in sales concerned almost all the main foreign markets but was most significant in the USA with a drop from 19.8 to 11.4m.m2.

Exports increased to Russia, Albania and some countries in the Middle East (UAE, Kuwait, Jordan) and Africa (Nigeria, Morocco and Algeria). Spain’s exports outside Europe remain high, 43% of total exports by volume and 33% by value.

The Spanish industry continued to suffer in 2009 as total sales in the Spanish ceramic tile industry reached Û2,600m., 29% less than the previous year according to Ascer.

However, the Spanish industry is on the way to recovery. As underlined to IM Ma–an—s from Ascer, Spanish tile manufacturers have seen an increase in sales figures in Q1 2010, most notably in the export market. “Key construction projects that were put on hold due to the international economic crisis are now starting to go ahead which is providing room for growth and a more positive outlook for the industry,” he added.

USA suffers

In spite of the further 22.6% fall in imports in 2008, the USA remained the largest ceramic tile importer in 2008. “The fall in imports is a direct consequence of the virtually identical decrease in domestic demand from 248 to 197m.m2 (-20.6%), which also pushed down national production to 45m.m2 (-10.7%),” analysed Acimac.

All the leading exporter countries to the USA except Columbia and Peru - have suffered losses. According to the US Dept. of Commerce, the rankings of the main exporters to the USA changed in 2008. Mexico is now at the first place by volume, followed by Italy and China with 28.7m.m2 (-11.9% compared to 2007).

However, “the situation is rather different if we consider the value (FOB) of exports,” pointed out Acimac. With an average selling price up from $14.7 to $16.1/m2 (+9.7%), Italy remains firmly in top position with sales of $578m., followed by Mexico with $254.5m. (average price $6.53/m.m2) and China with 160m. (average price $5.57/m.m2).

China growth

Without surprise, China is by far the world’s largest ceramic tile producer, exporter and consumer (see table p.39). According to Acimac, estimated production in 2008 was about 3,400m.m2 but this figure could reach up to 5,700m. m2 according to other sources. China has “abundant raw materials, low labour costs and good technologies created by their research and development activities,” explained Bodur to IM.

Since 2008, the country’s production continued to methodically grow at a regular pace. The China Ceramics Industry Association reported that production increased by 22% during the first eight months of 2008 compared to the year before. Between January and September the same year, exports increased by 21.7% compared to same time in 2007, reaching 517m.m2.

However, growth was slowed from October 2008. Chinese ceramic tile exports were lightly affected as the downturn dramatically impacted China’s main customer: Europe and the USA.

The USA is one of the very few markets where China lost ground in 2008: -8% in volumes (27.6m.m2) but +12.6% in value ($129m.) thanks to the increase in average price from $3.82 to $4.67/m2.

China mainly exports to Asia but new markets are emerging such as Africa, which “is becoming an increasingly important destination with Nigeria and Ghana amongst the leaders” as explained Acimac.

Another major change is the increase of the market in the Middle East. Acimac reported that sales in China’s two largest foreign markets have once again increased sharply: Saudi Arabia (+51% on 2007 to a total of 56.7m.m2) and the UAE (+24%, 41.2m.m2) (see Asia & Middle East potential).

India stable

India, the world’s fifth largest producer and third largest consumer, has survived relatively well as both production (390m.m2) and domestic demand (403m.m2) remained practically stable in 2008 compared to the year before.

“The Indian economy has picked up and is booming. As a result, building construction activities have substantially increased,” Gaurang Singhal from Wolkem India Ltd explained to IM.

“Simultaneously, the government is taking up projects of modernising airports, railway stations, school construction etc. and millions of dollars are being spent on these projects” therefore boosting the ceramics industry, added the director of India’s largest wollastonite producer, one of the main minerals used in ceramic tiles (see Ceramic tile minerals).

India mainly buys material from China but the country is neither a big exporter nor importer (respectively 11m.m2 and 24m.m2), which would explain why the Indian industry remained so stable during the downturn.

According to P.N. Trivedi, chairman of the Indian Council of Ceramic Tiles and Sanitaryware (ICCTAS), some 25-30 new production units are due to start up within a year in the Morbi area in Gujarat state. Added to the positive signs of recovery from the economy, this is expected to bring a 12-15% growth in production and domestic demand in 2010.

As a consequence, Wolkem has decided to develop projects especially for the ceramic industry. The company has revealed to IM that it will start mining feldspar in its two existing wollastonite and calcite mines in Rajasthan, initially targeting 50,000 tpa to supply the Indian ceramic industry.

In addition, Wolkem is substantially enhancing its production capacity for both wollastonite and calcite: a 25% increase in wollastonite capacity at Sirohi Road, Rajasthan and about 15% increase in total minerals capacity, combining all our four calcite grinding plants, in Sirohi-Rajasthan, Tirunelvelli-Tamil Nadu, Vishakapatnam-Andhra Pradesh and Poanta Sahab- Himachal Pradesh.

Middle East & Asia potential

At present, the ceramic tile industry is witnessing an era of unprecedented growth across the Middle East and Asia where manufacturers are looking for better quality and cost efficiency to remain competitive.

Asia

China and India, the two big players in Asia, are being followed by a group of countries with a rapidly expanding ceramic industry. Iran, Indonesia, Vietnam and Malaysia, which have limited imports, climbed into the top 15 world tile producers to reach 6th, 7th and 15th positions respectively in 2008 according to Acimac.

“The factor shared by all these countries is an increase in production in response to growing domestic demand, although not sufficient to avoid production surpluses of 23-30m.m2 in all countries with the sole exception of Indonesia,” reported the Italian organisation.

Iran and Indonesia have become the 4th and 5th largest world consumers with demand of 265m.m2 and 262m.m2 respectively; Vietnam ranks at the 7th position with a consumption of 220m.m2. All four countries feature amongst the world’s top 15 exporters, with exports ranging between 23m.m2 for Malaysia and 27m.m22 for Iran and Indonesia.

Middle East

The regional drive to develop schools, hospitals and affordable housing is expected to provide the strongest opportunities in construction, particularly Saudi Arabia which became one of the top importing countries, ranking third in 2008 (IM December 2009: Saudi ceramics eye construction boom). The country has doubled its production since 2004.

The ceramic tile imports of the country increased from 77m.m2 in 2007 to 99m.m2. According to Acimac, this increase is “almost entirely attributable to Chinese exports - Saudi Arabia being China’s major export market - which reached 56m.m2, a figure that is confirmed by local companies”.

The second largest exporter to Saudi Arabia is Spain with 16.8m.m2 in 2008 and in turn, Saudi Arabia is Spain’s second largest export market after France. Italy is also well represented in the country with exports up in 2008 from 6 to 6.8m.m2.

As a consequence, the anticipation of ceramics market growth has prompted leading companies to develop new and expand existing plants. Saudi Ceramic Co. (SCC) is increasing the production capacity of its tile, sanitaryware, and frits, and introducing new ceramic products. At the same time, the Riyadh-based company is also expanding its dry grinding plant and planning to launch a mining company (IM 28 October 2009: Saudi Ceramics expands capacity).

In Dammam, new Saudi ceramics producer, Future Ceramics and Porcelain Co. which planned to bring its new plant on stream in three stages, is targeting an annual production capacity of 13m.m2 ceramic tiles and porcelain.

The plant has been developed at a cost of SAR380m.($101.3m.) and is wholly Saudi owned, with technical co-operation from four Italian ceramic companies, including Sacmi (supplying kilns, presses, and spray driers) and Technoferrari (handling equipment).

Another major supplier is the UAE, from where RAK group is the third world top ceramic tiles producer (see World top 15 ceramic tiles manufacturers). The local ceramic industry is also growing and the largest producer, Saudi Ceramics, has increased production from 21 to 28.6m.m2 through an expansion in production capacity to 32m.m2/year.

Turkey falls back 3 years

Turkey, the world ninth largest ceramic tiles producer and the fourth exporter, has been impacted by the crisis, seeing its production, consumption and exports respectively dropping by 13.5%, 19.4% and 11.5%. in 2008 in response to a sharp fall in sales in the domestic market according to Acimac data. “The Turkish ceramics market fell back to three years before,” Bodur highlighted to IM.

However, the value of exports on the other hand increased by 8% to $525.4m. “owing to an increase in average selling price from $4.7 to $5.7/m2 (+21%)”.

“Turkey has around 30 players in the tile business with 360m.m2 of installed capacity and around 40 players in the sanitaryware business with 21m. pieces production capacity. Last year we were able to use not more than 70% of our installed capacities,” Bodur said. Kale, Vitra, Toprak, Yurtbay, Hitit, Serel, Creavit, Seranit are among the most important producers of tiles and sanitaryware in Turkey.

The country is well placed to secure an advantage in the industry when conditions for ceramics improve. Its healthy trade relationship with the world’s growing economics, plus its key location straddling the markets of East and West, may determine how well Turkey’s ceramics exports perform in the short to medium term future.

The Turkish Ceramics Federation estimates that production figures will remain stable for 2009 at 2008 levels. But even though domestic sales are expected to recover (+10.4%), exports are likely to continue to fall (-7.6% by volume and -2.9% in value) in spite of a further increase in average price to $6/m2.

Brazilian opportunities

Brazil is the world’s second largest ceramic tiles producer and consumer and the fifth largest exporter. According to Acimac data, production has increased steadily for more than 20 years to reach 713.4m.m2 in 2008, driven by 13.2% growth in domestic consumption to 605.4m.m2. In 2008, consumption increased by 13.2% owing to the dramatic development of Brazil’s construction during the last year. Also, the perspective of the 2016 Olympic Games and the 2014 FIFA football World cup in addition to the government plans for construction will certainly boost the growth (IM January 2010, p.24: Brazil’s rise to recovery).

However, exports on the other hand have continued to fall regularly every year since 2004 , dropping by 20% in 2008. Of this 21m.m2 fall, 11m.m2 was due to the USA, down to 15.3m.m2 (-41%). The Brazilian Association of Ceramic Tile Manufacturers Anfacer’s 2009 forecasts suggest a further slight growth in consumption (+2%) and a slowdown in production (1.4%), while exports may recover in value by 5%.

Brazil is one of the world’s largest kaolin producer Ð one of the main raw material used in ceramic tiles Ð but it is mainly used in paper applications, even though limited volumes are used in other industries such as ceramics (IM February 2010, p. 50: Brazil’s eyes minerals future)

Outlook: slow recovery

After a year described at one of the worst ever, it is expected that the ceramic tile market will start to recover and “even increase in the coming years”. One of the driving factors is that the construction industry should restart this year, therefore hauling related industries such as ceramic tile through recovery. “The ceramic tile market has a strong correlation with the building industry, so it is expected that sales will show an increase as the housing market starts to recover. It is predicted that sales will slowly increase towards the end of 2010 and that signs of more substantial growth will be seen towards 2011,” Ascer’s Ma–an—s forecasted to IM.

Acimac also reports a “moderately positive forecast for 2010”. The Italian organisation pointed out encouraging “if unconfirmed” signs from several foreign markets, particularly North Africa, Turkey and South America, where Brazil, one of the world’s largest manufacturing countries, appears to have resumed growth.

This speed of healing will obviously vary depending on the regions. As no surprise, Asia is supposed to lead the way to healthier days with the Indian ceramic market forecasted to grow at the rate of 5% to 10% in the next five years.

China is also expected to continue its unstoppable growth. But as Bodur underlined to IM, it is “a threat for the world production”. “They have a strong construction industry mainly for housing. They are using most of their output locally. If their building industry fails it will be a catastrophe for the world ceramics industry,” she explained.

In Europe and the USA, it is more likely that the recovery will be exhaustive and slow in 2010. “The European market is expected to remain highly stagnant and continues to cause serious concern,” confirmed Acimac.

“Italy will always lead the industry and Turkey will follow new trends and technologies with strong brand names, service and quality of her industry,” forecasted Okyay, hoping that “Spain should recover soon and take its share in world production.”


Ceramic tiles at a glance

World production
(2008): 8,495m. m2

World consumption
(2008): 8,263m. m2

Main producers: China (40%), Brazil (8.4%), Italy (6%), Spain (5.8%), India (4.6%)

Main consumers: China (34.2%), Brazil (7.3%), India (4.9%), Iran (3.2%), Indonesia (3.2%)

China (34.2%), Brazil (7.3%), India (4.9%), Iran (3.2%), Indonesia (3.2%)

Main minerals: Clays, kaolin, feldspar, zircon, talc, wollastonite, silica (see table p.33)

World manufacturing areas (% 2008)



* Turkey included ** Mexico included
Source: Acimac


“2009 was the worst year in the history of the ceramic industry”

Pietro Cassani, Acimac’s chairman, talked to IM about the severe impact of the financial crisis on the ceramic sector

What was the recession’s impact?

The severe economic and financial crisis in most world markets has naturally impacted the ceramic sector due to its close links with building, one o f the industries worst affected by the downturn. The year 2009 was the worst year in the history of the ceramic industry and the quantities produced worldwide may have fallen slightly for the first time ever. Among the large producer countries which make a significant contribution to variations in world production, China, Brazil, India and Iran maintained or slightly increased their production compared to 2008 whereas all the others suffered a fall in output. The two historic producer countries, Italy and Spain, have seen their output almost halved in the last two years to reach levels of 360m.m2 and 323m.m2 respectively.

What are the opportunities for the industry?

Innovation will play a crucial role in bringing this sector out of recession. Present production technologies allow for new and alternative uses of ceramics. Examples include the use of large ceramic tiles on external curtain walls, ceramic sheets with thicknesses as small as 3mm that can be laid over existing tiled floors without the need to remove them, use for covering tables, kitchen tops and furnishing applications in general, as well as other applications that would previously have been unimaginable for this material.

Which are the most promising regions?

For several years now, the increases in production and consumption have been concentrated in Asia, which is largely responsible for the rapid growth in world population and is consequently experiencing a building boom. In recent months, we have seen signs of recovery in North Africa, the Arab countries and Latin America.

What about Italy?

Like all advanced economies, Italy has been badly affected by the downturn. Production has fallen considerably, largely due to the high export propensity of the Italian tile producers. (Italian ceramic manufacturers export around 70% of their output to the main world markets, principally the USA.)

However, the Italian producers’ role as the world trend-setter has been unaffected, as has the high technical quality of their products due to the strength and vitality of a national industry that is ready to take on the new challenges posed by the changed international situation.

What about finding raw material?

Clay, the principal raw material shared by all ceramic materials, is a common mineral found more or less everywhere in the world. With a good level of technology, it is possible to produce medium quality tiles just about anywhere. As a result of advances in technology and aesthetics in the field of ceramic production, ceramic bodies especially in the case of tiles have been considerably improved. Particularly with the advent of porcelain tile, ceramic bodies have been enriched with white clays, mainly from the Ukraine, which offer superior physical and chemical characteristics.


Ceramic tile minerals

Minerals Properties World production Main sources
Plastic/ball clays Used to provide strength and plasticity 20m. tpa Argentina, Brazil, Chile, China, Czech Republic, France, Germany, India, Italy, Malaysia, Thailand, Turkey, UK, Ukraine, USA, Vietnam
Kaolin Good casting properties 7m. tpa (high quality, processed); 15m. tpa (low quality) Argentina, Australia, Brazil, China, Czech Republic, France, Germany, Indonesia, Iran, Malaysia, Portugal, Spain, Thailand, Turkey Uk, Ukraine, USA
Feldspar
Flux, filler - Remaining bulk ingredients; depends on the type of tile 14-16m. tpa Italy, Turkey, China, Thailand
Limestone Source of CaO which helps form calcium silicate during cooling > 100m. tpa, but ceramic consumption is not large Deposits worldwide
Quartz Provides stability, strength and hardness to the ceramic body > 120m. tpa Deposits worldwide
Talc Increases thermal shock and electrical resistance 8.6m. tpa, of which about 2.8m. tpa used in ceramics China, Finland, France, India, USA
Wollastonite Enhance the tile body properties 650,000 tpa; estimated 200,000 tpa for ceramics China, India, USA, Mexico, Spain, Finland
Silica, potassium, sodium, boron, alumina Frits, glazes - More complicated as these are often highly specialised. Boron: 4.5m. tpa (excluding US production) Deposits worldwide.
Argentina, Bolivia, Chile, Peru, South Africa, Turkey, USA (boron)
Zirconia Glazes - Opacifier 760,000 tpa Australia, South Africa, Ukraine, Brazil, India, China
Zinc
oxide Glazes - Matte and satin effects 11.1m. tpa (zinc) Australia, Canada, China, India, Ireland, Kazakhstan, Mexico, Peru, USA
Inorganic pigments Glazes - Colour, design Deposits worldwide


Top ceramic tile manufacturing countries


Rank Manufacturers Consumers Exporters
Country* 2008
(m. m2) % world Country* 2008
(m. m2) % world Country* 2008
(m. m2) % world
1 China 3,400 40 China 2,830 34.2 China 570 29.7
2 Brazil 713 8.4 Brazil 605 7.3 Italy 355 18.5
3 Italy 513 6 India 403 4.9 Spain 306 15.9
4 Spain 495 5.8 Iran 265 3.2 Turkey 92 4.8
5 India 390 4.6 Indonesia 262 3.2 Brazil 81 4.2
6 Iran 320 3.8 Spain 240 2.9 Mexico 62 3.3
7 Indonesia 278 3.3 Vietnam 220 2.7 Portugal 37 1.9
8 Vietnam 270 3.2 USA 197 2.4 UAE 34 1.8
9 Turkey 225 2.6 Russia 190 2.3 Poland 34 1.8
10 Mexico 205 2.4 Italy 176 2.1 Germany 28 1.4
11 Russia 143 1.7 Mexico 176 2.1 Iran 27 1.4
12 Egypt 140 1.6 Saudi Arabia 136 1.6 Indonesia 27 1.4
13 Thailand 130 1.5 Turkey 129 1.6 Thailand 25 1.3
14 Poland 118 1.4 France 128 1.5 Vietnam 25 1.3
15 Malaysia 85 1 Thailand 120 1.5 Malaysia 23 1.2
Total 7,425 87.4 6,077 73.5 1,725 89.9
World total 8,495 8,263 1,919

* Red: Decrease between 2008/07; Green: increase between 2008/07; Black: no variation for 2008/07
Source: Acimac


Top 15 ceramic tile manufacturers

Company Country Production (m.m2 2008) Plants
Marazzi Group Italy 110 Italy, Spain, France, Russia and the USA.
Grupo Lamosa Mexico 107 10
Rak Ceramics UAE 106.2 14 in Bangladesh, Sudan, China, India, Iran.
SCG – Siam Cement Group Thailand 104 18, including 1 in Indonesia.
New Zhong Yuan China 99 5
Prime Group Vietnam 90 9
Ceramic Cleopatra Group Egypt 74 8
Guangdong New Pearl Ceramics Group China 70 9
Cersanit Poland 61.5 5, including one in Russia, Lithuania, the Ukraine
Mulia Ceramics Indonesia 57.2 7
Lasselsberger Austria 56 12, including 6 in Czech Republic, 1 in Slovakia, 2 in Hungary, 3 in Romania
Ceramica San Lorenzo Argentina 55.7 7, including 1 in Peru, 1 in Chile, 1 in Mexico
Gruppo Concorde Italy 50 10, including 1 in France, 1 in Russia
Roca Spain 50 5, including 3 in Brazil
Vitromex Mexico 47.9 5

Source: Acimac