European ceramics industry battles slowing demand

By Laura Syrett
Published: Friday, 27 November 2015

Weak Chinese growth concern for suppliers as IKEA boosts otherwise slow European market and consolidation and e-commerce gain pace.

Rising competition and falling demand in the European ceramics industry is testing the ability of raw materials suppliers and manufacturers to maintain both margins and market share.

Ceramic materials form the basis of everything from roof tiles and wash basins, to proppants for fracking, to technical ceramics for high temperature industrial processes, and represent a major segment of the global industrial minerals industry.

Although overall global consumption of ceramics is growing at a modest pace – supported particularly by demand for white ware and sanitary ware in emerging Asian economies – the level of market expansion has not been enough to sustain production capacity in all parts of the world, or prevent prices from weakening. 

"In China, we have definitely seen a decline," said Harry Li, a marketing representative of Zhengzhou Zhengzhong Fuzed New Materials Co. Li was speaking to IM at Ceramitec 2015 – a trade fair for the ceramics industry held every three years in Munich, Germany.

Many exhibitors at the 2015 meeting noted how the event had shrunk over the last decade, filling just four halls at the Munich Messe this year, when earlier shows had covered eight or more of the Messe’s sprawling exhibition spaces. This, attendees said was a reflection on both the weak condition of the ceramics industry and the fact that much of its business is now done online.

While e-commerce is cheaper than physical exhibitions and allows suppliers and customers to connect at the click of a button, the former trend is more worrying.

Li, whose company mainly produces fused zirconia powders for refractories, said that while there may be some pockets of growth, broadly speaking, Chinese ceramics demand was cooling off.

He added that Europe was still an important market for Zhengzhong as Chinese raw materials still have a strong position in the international supply chain because of their cost advantages.

For traders of the minerals, the situation is also becoming increasingly tight. "Margins are down to single digits," one Germany-based representative of a major minerals supplier told IM. He said that, in some cases, real prices for ceramic minerals were up to $50/tonne lower than publicly quoted values, owing to heavy discounting and aggressive bargaining by buyers under pressure.

"The refractory ceramics market is very difficult, particularly with the steel industry the way it is," one source, who buys ceramic minerals in China and supplies them to European customers, said. The source dismissed suggestions that consumption of refractory ceramics would rebound next year.

"We don’t see a recovery in the steel industry on the horizon; I think it will be tough for some time," they said.

Higher and wider

In order to bolster revenues, many ceramic materials producers are focusing on higher purity premium products and on broadening their offering.

Miriam Niedenhof-Ducker, sales and marketing manager for speciality products at Japan-based Ube Group, said that the company’s business was doing well. Ube’s speciality products arm makes silicon nitride and silicon carbide powders, which it produces to high purities for end markets including precision machinery parts, semiconductors, aircraft and automotive parts.

"Our material is very high purity, so people choose it for the performance," she told IM. In such cases, where the functionality of the end products depends on the quality of the constituent materials, market share is safer than for lower quality, more widely available materials.

Ube uses a patented production process to produce powders with particles of uniform size – "this is very unique in our industry," Niedenhof-Ducker said.

Graham Lewis, managing director of chemicals distributor Norkem, also said that value addition to raw materials was an important way of protecting revenues.

The company, which has offices in the UK, Belgium and Australia, said that the market picture was mixed across the world, but that the UK was doing well, thanks to an active housebuilding market. "But the rest of Europe is struggling," he said. "In Belgium and the Netherlands, we have seen some signs of improvement, but generally it’s quite tough."

Although there are localised recoveries in ceramics demand, particularly sore points in Europe were identified as tile demand in France and consumer ceramics in Eastern Europe.

According to Marton Pap, a Hungary-based sales manager
of ceramic kiln furniture for French industrial minerals group, Imerys SA, the expansion of the Swedish homeware store, IKEA, into Eastern Europe can create strong demand hubs. "If a new IKEA opens up, then this can support whole new ceramics manufacturing operations nearby," he said.

Technology

As well as increasing the purity and variety of products on offer, companies are also investing in new production processes – a trend that is benefitting equipment and technology suppliers, which are otherwise struggling with the general downturn in manufacturing volumes.

"Customers are looking for more automation, precision, speed and accuracy in their manufacturing processes," one R&D expert at a German technology business told IM. "If you can show people the technology you have, what went into designing it and educate people a little about why it will help them, then you have a good opportunity to get your products into that industry."

"This year has been very good for us," Henrik Molleken, head of marketing for processing technology specialist, Eirich Eirich, told IM. "People are looking at ways of energy saving especially," he said, adding that companies were willing to pay to upgrade their systems because of the amortisation benefit. "If a technology has paid for itself in three years and starts to save you money, then it was worth it," he said.

3D printing is another innovative production process that is becoming increasingly prevalent in the ceramics industry.

Although Ceramitec 2015 was markedly smaller than the last event three years ago, industry participants said that this was to do with consolidation in the ceramic materials sector, as much as the weaker market conditions.

"We are seeing more mergers and fewer new companies entering the market," one seasoned industry professional told IM. "The problem is, the customers are also getting fewer. So there is more competition from bigger players with smaller companies trying to match them on prices, but even less people to sell to."