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TRANSCRIPT
K. SCHIPPER: Hi, I’m K. Schipper for Radio Stone Update. Joining me today will be Emerson Schwartzkopf, publisher and editor of Stone Update, Hard Surface Report and Slab and Sheet, as we take a look back at the top stories and trends in news of the hard surfaces industry for 2022.
0:44
As the planet neared and then passed the second anniversary of the COVID-19 pandemic, the virulent disease and its Omicron variant put the brakes on several industry related early-in-the-year trade shows that had looked to 2022 as the chance to finally resume face-to-face business.
One of the first to acknowledge that COVID was still in play was the Spanish tile event Cevisama. Initially, organizers of the show, typically held in February, announced it would take place in mid-June in Valencia, Spain. Show director Carmen Alvarez said at the time that the decision was based on what the organizing committee called the negative evolution of the pandemic.
The move was a setback for Valencia, which had been designated as the World Design Capital 2022, especially given that the 2020 show – which took place before COVID became widespread – drew more than 800 brands and firms and more than 90,000 professionals, with more than 21,000 coming from other countries.
Then, in early April, Cevisama organizers announced that they were cancelling the 2022 show – although not because of COVID. At that point, the issues surrounding the event took on an entirely geo-political cast as uncertainty centered on Russia’s invasion of Ukraine. With the outbreak of war, prices of gas spiked to levels that were causing stoppages in production and furloughs of the work force.
Further complicating matters, a large amount of clay used in the production of Spanish tiles comes from Ukraine, which raised costs and scrambled logistics. While organizers reported that registration was up 25 percent from the previous show, as the event date drew closer, exhibitors were pulling out in sufficient numbers to make it unattractive to hold a 2022 event. Cevisama is now set to open next Feb. 27.
Scrambled dates for the Xiamen International Stone Fair were strictly due to COVID. Organizers of what had become the world’s largest stone show before the pandemic announced in January that the show was rescheduling. Initially set for mid-March, the date was changed to early May.
Then, after postponing the May show due to China’s on-going battle with COVID, in mid-June organizers announced they would try again starting July 30th. That show did take place, although foreigners who held visas issued before January 2020 were prohibited from using them, and those lucky enough to get new visas were required to get two separate PCR tests from two different labs before departing the U.S. and test again once arriving in China.
The 2023 Xiamen International Stone Fair, meanwhile, is going through schedule changes already. First set for late March, the event will now be held in early June in hopes of looser travel rules for non-Chinese attendees. The 2019 show drew more than 150,000 attendees from all over the world.
As with Cevisama, the cancellation of Brazil’s top show, the Vitoria Stone Fair, came on the heels of a combination of COVID issues and political unrest. Organizers Milanez & Milaneze pulled the plug on the February’s show only days before it was scheduled to open.
After promising to find a new date later in the year, it was announced in early March that the show would return Feb. 7, 2023. The postponement was the third time in five years the event’s dates were changed.
4:19
EMERSON SCHWARTZKOPF: This is Emerson Schwartzkopf. In the United States, hard-surface imports spent most of the year flaunting the generally dour financial news, with record amounts of surfaces at ports-of-entry despite rising inflation and other downward economic trends
Through October, the customs value of natural stone, quartz surfaces and porcelain totaled nearly 4.8 billion dollars, or 11.3 percent ahead of the first 10 months of 2021. Before this year, no single month reached the half-billion-dollar mark; in 2022, it happened four times.
Quartz surfaces led all sectors through October at 1.5 billion dollars – that figure may need an asterisk, though — followed by porcelain at 1.1 billion dollars. Granite led natural stone with 698 million dollars.
The high numbers in import values, however, didn’t always indicate a business boom in the United States. Pair those inflation-touched values with the actual volume of imports, and the results often tell a different story.
Take marble, for example. The total value of imports through October for cut and one-side-polished marble came to just shy of 649 million dollars, or 12.7 percent ahead of the same time in 2021. The actual amount of the material received in the United States in 2022’s first 10 months totaled 685.5 thousand metric tons … and that’s a half of a percentage point less than the same time last year.
Other sectors such as granite and the omnibus other stone (which includes quartzite) also show small turndowns or increase in volume through October. And, while porcelain shows an 11 percent increase in volume for the first ten months, the customs value is up 22 percent.
Hard-surface imports, depending on the surface type, make up anywhere from 66 percent to more than 90 percent of materials used in the United States. The tapering-off of shipments may be the true indicator of an industry slowdown – not a full-blown dive, like the Great Recession 15 years ago, but the end of the post-pandemic booming market.
And .. why the asterisk on quartz surfaces? It turns out that the original source of import data – the U.S. Census Bureau – appears to have made an error in 2022 within adding up the amount of the material coming into the country. Details are still forthcoming at the time of recording, but corrections may lower previously reported data by 50 percent or more.
7:15
SCHIPPER: Not all of the industry’s major shows were dark or delayed in 2022. Early autumn found full aisles at both the Marmomac Natural Stone Exhibition and the international tile event Cersaie. And, before that, Coverings declared its 2022 show, held in April in Las Vegas, to be a success.
Taffy Event Strategies, the event planning company for Coverings, reported nearly 18,000 hard-surface professionals attended the four-day show. The figure represents an 18 percent increase in attendance from the July 2021 Coverings show in Orlando, Fla. Exhibitors represented 34 countries with 69 percent of them from outside the United States.
Registration for the 2023 Coverings show scheduled for April 18-21 at the Orange County Convention Center in Orlando is already open at www.coverings.com
Marmomac drew 47,000 attendees to its 56th edition, which was held in Verona, Italy, at the end of September. The number all but returns the event to its pre-COVID attendance. Veronafiere CEO Maurizio Danese was particularly impressed with the return of important target countries such as the U.S., Brazil, India and Turkey.
Marmomac 2022 also launched a new green approach for the Italian natural stone production chain in the form of a 10-point document in the Authentic Natural Stone Sustainability Manifesto. The event saw an expanded Italian Stone Theater area for presentations, which included a talk on U.S. hard-surface demand by Stone Update Editor Emerson Schwartzkopf.
Marmomac Plus, the show’s virtual portal is continuing, with the next in-person edition of the show set to begin next Sept. 26.
And, down the road from Marmomac in Bologna, Italy, Cersaie drew slightly more than 90,000 attendees. That number represents an almost 50 percent increase from last year and brings the show within shouting distance of its 2019 attendance, when more than 112,000 people trekked the aisles.
Organizers of Cersaie were particular cheered that 48 percent of this year’s attendees came from outside Italy, as did more than a third of the exhibitors. In 2023, the show will start one day earlier than Marmomac, on Sept. 25.
9:41
A Word From Quantra
10:53
SCHWARTZKOPF: With imports come the tales of tariffs, especially with quartz surfaces. An investigation by U.S. Customs and Border Protection this year found that a significant number of exporters in Malaysia marked Chinese-made material as made in their own country to evade high tariffs on quartz surfaces from China.
Now, all quartz surfaces shipped to the United States from Malaysia must include documents certifying that the materials aren’t made in China. In addition, nine Malaysian companies caught doing the origin switch – something called transshipping – won’t be allowed to certify any quartz-surfaces they might attempt to send to the United States.
More than 35 U.S. based importers of natural stone from China await a ruling from the federal Court of International Trade concerning Section 301 tariffs imposed on nearly all Chinese imports by the Trump Administration. The stone importers, along with thousands of other companies, are challenging how the 25 percent general tariff was imposed by the office of the U.S. Trade Representative from 2017 to 2019. A final decision is expected sometime next year.
The big tariff news for hard surfaces next year, however, should come in the first week of January, as a division of the U.S. Commerce Department will reconsider its initial decision last summer to boost anti-dumping tariffs on quartz surfaces from India from three percent to slightly more than 160 percent.
The proposed rise came as part of the annual review of the unfair-trade tariffs imposed by the United States International Trade Commission after an investigation by the International Trade Administration, or ITA, a separate entity under the Commerce Department. Documents being sent by an Indian producer didn’t meet the final deadline imposed by ITA this summer – reportedly the documents arrived from India five hours late.
The ITA refused to accept the documents, and a memo from the federal department stated the rates would change from single digits to more than 320 percent for the late-filing producer, and more than 160 percent for all other Indian quartz-surface exporters.
The higher rates come from claims made by U.S. surface manufacturer Cambria Company LLC in its original unfair-trade complaint about Indian quartz surfaces in 2019; it should be noted that, after investigating that complaint, the ITA recommended only the single-digit rates imposed in 2020.
The sole Indian producer not subject to the higher rate is Pokarna Engineered Stone Ltd., the makers of Quantra and the sponsor of Radio Stone Update. Pokarna’s original low rate went to zero; unlike other companies, Pokarna did not increase its exports in 2018 and 2019 to the market-dumping level set by the United States.
The ITA noted this summer that the final decision on the tariffs would be made by Nov. 7, but appeals and documents filed with the federal office caused an initial delay until early December, and then a new deadline of Jan. 4.
14:27
SCHIPPER: The Italians aren’t the only ones concerned with taking a green approach to the natural stone production chain. Talking sustainability a little closer to home, the new version of the Natural Stone Sustainability Standard, otherwise known as “ANSI/NSI 373 Sustainable Production of Natural Dimension Stone” became available in early March.
The new version reflects the standard’s name change. Updates are required at least every five years for the standard to maintain relevance in an ever-changing sustainability market. The standards had last been updated in 2019.
All the updates are coordinated with NSF International, an independent global organization that facilitates the development of standards, and tests and certifies products for the food, water, health sciences and consumer goods markets.
Brittany Storm of Mapei Corp. and the chair of the Natural Stone Sustainability Standard Joint Committee, calls the new standard more than just a way to comply with requirements, but rather a roadmap to greener processes and procedures. More information is available at www.naturalstoneinstitute.org/sustainability.
15:43
SCHWARTZKOPF: The mood of the kitchen-and-bath industry in the United States changed as 2022 progressed … and there’s no better evidence of that than a key market survey’s quarterly reports during the year from the National Kitchen and Bath Association, or NKBA.
The Kitchen and Bath Market Index is a study from the NKBA and John Burns Real Estate Consulting that polls 600 to 900 industry professionals to get the pulse of the industry. This year, the index showed a strong, healthy industry at the start … and something else by the fall.
The first quarter report, released in May, highlighted what it called a “bullish” 15 percent sales growth projection for the year, up from a fourth-quarter 2021 prediction of 9.4 percent. However, in a foreshadowing of things to come, nearly all of that growth – 14 percent – would come from higher prices, and only one percent from actual growth in business volume.
The first quarter-rating for future business conditions, on a scale of one to 100, came in at 78.6, indicating decent, if not bullish sales growth. Major concerns for the year included cost of materials and supply-chain problems.
Move to the second-quarter market index report in August, and the kitchen-and-bath bulls are losing some of their charge. All segments of the kitchen-and-bath market show a slowing of sales growth – even with the higher costs coming with continued inflation. Full-year sales growth predictions dropped back to year-end 2021’s estimates of 9.4 percent.
The second-quarter rating for future conditions, meanwhile, took a major hit, going from 78.6 to 61.8 out of 100 … and a drop below 50 would move the industry’s attitude from bullish to bearish.
The third-quarter index, coming out last month, didn’t make such a drastic slide … but it came close, with the future business conditions rating moving to 55.4. And that full-year sales-growth optimism of 15.1 percent in the first quarter? That plummeted to 1.3 percent, and that’s not adjusted for inflation, which hints at an actual sales decline of at least 10 percent, if not more, on the year.
18:18
SCHIPPER: In October, the Natural Stone Institute published industry wide documentation used for environmental and health overviews. The institute now offers ISO Type 3 environmental declarations, also called Environmental Product Declarations or EPDs in three types of stone applications: cladding, flooring/paving and countertops.
Also published are 13 Health Product Declarations or HPDs for natural stone found in 15 MasterFormat® classifications.
An EPD is an independently verified and registered document that outlines environmental information on product lifecycles to enable comparisons between similar materials and defines the environmental impacts throughout the entire life cycle. HPDs provide design teams and owners detailed information on material ingredients and potential health impacts.
All 18 companies who participated in contributing product lifecycle data can now use the EPDs to represent their products for green building projects. All NSI members can use the HPD designations.
And, in July, Kaeser Compressor celebrated the first anniversary of manufacturing with 100 percent green energy and matching consumption in its home country of Germany and renewable energy resources in the United States.
The milestone is actually a composite of three programs that saw parent company Kaeser Kompressoren SE install a photovoltaic system on its main manufacturing plant in Coberg, Germany, while purchasing renewable energy credits for its remaining manufacturing facilities there.
In the United States, the Fredericksburg, Va.-based Kaeser Compressors is part of Dominion Energy’s green power program and pays a premium per kilowatt-hour for its headquarters building. For its more than 20 branch locations across the U.S., as well as teleworkers, the company bought renewable energy certificates – or RECs – from Dominion Energy exceeding the amount of power consumed.
20:26
SCHWARTZKOPF: The biggest corporate change in hard-surfaces this year came in April when CVC Capital Partners, one of the world’s largest private equity firms, acquired Spanish sintered-stone maker Neolith in a deal reported to be between 400 million euros and 500 million euros.
The move came only three years after the company’s founding Esteve family sold a majority stake to the Investindustrial private-equity firm for a reported 250 million euros. Luxembourg-based CVC is the largest private-equity firm in Europe with a total of approximately $122 billion in assets.
Equity capital also funded an ownership change at global natural-stone processor Polycor in April, as the company’s management joined private investors Birch Hill Equity Partners and provincial holding company Investissement Quebec. No terms were announced for the deal, which bought out a previous partnership of equity investors in the Quebec-based company. Earlier in April, Polycor acquired Evans Limestone, a family-owned limestone-production company in Bedford, Indiana.
In other equity-capital action, London-based Sun European Partners LLC acquired majority ownership in late May of TENAX, an Italian manufacturer of treatments, abrasives, and tooling for the natural-stone and man-made hard-surfaces industry. TENAX’s founders, the Bombana family, retains what they called “a significant stake” in the company, although terms of the deal weren’t disclosed.
MSI made a major move as a leading surfaces importer in announcing plans for a 61.6 million dollar East Coast distribution hub in Suffolk, Virginia. The new facility will only be a few miles from the four container-cargo anchorages of the Port of Virginia at Hampton Roads harbor. MSI also expanded its nationwide reach with new sales and distribution centers in Connecticut, Kansas, New York, North Carolina, Ohio, Pennsylvania, and Wisconsin,
Cambria completed a sixth production line and an additional polishing line for quartz-surfaces at its Le Sueur, Minn., factory, which should ultimately add 110 new positions to its workforce of 530. The expansion is the first part of a two-phase plan, with Cambria starting work on adding a seventh production line this summer. The company also opened three new sales/distribution centers in Georgia, Massachusetts and Texas, with another under construction in Virginia.
In other news of note from around the hard surfaces industry in 2022….
23:24
The year marked the 75th anniversaries of two big players in hard surfaces. Robert Brittingham launched the Dallas-based Dal-Tile Corporation in a small Quonset hut under the name of the Dallas Ceramic Company in 1947. While manufacturing tile, the company also grew through some canny acquisitions, changing its name to Dal-Tile in 1980.
The company moved into the natural-stone market with its first tile and stone gallery in Dallas in 1999. Flooring giant Mohawk Industries acquired Dal-Tile in 2002. Three years ago, it began domestic production of quartz-surfaces, and today is the largest tile and countertop company in the world, manufacturing everything from one-inch mosaic tiles to 11-foot quartz slabs.
The National Tile Contractors Association – the NTCA – celebrated its 75th anniversary by bringing one of its training vans to the TISE Expo floor at the Mandalay Bay Convention Center in late January. Driven by trainer Robb Roderick, the extra-tall and extra-long van was on hand to offer tours and promote the NTCA’s training program.
The organization also offered demos on the show floor on cutting and installing tile, but the goal was generally to allow contractors who weren’t familiar with the organization’s programs to see the van and ask questions.
24:53
Finally, a granite structure sometimes referred to as an American Stonehenge met an ignominious fate the night of July 6. The Georgia Guidestones, located approximately seven miles north of Elberton, Ga., were heavily damaged by an explosion, and later destroyed in the interest of public safety.
Almost 20 feet tall with its capstone, the guidestones consisted of six granite slabs quarried locally and installed in a cow pasture in 1980. The slabs, funded by an anonymous donor, displayed a ten-part message espousing the conservation of mankind to future generations in 12 languages. It also served as an astronomical calendar.
Although the monument drew as many as 20,000 tourists a year, it also became the subject of conspiracy theories, with one candidate in this year’s Republican gubernatorial race calling it “Satanic.” Immediately following the explosion, a security camera on the site showed a car leaving the area, but no arrests have been made.
The Elberton mayor initially announced plans to rebuild the monument in late July, but at a subsequent city council meeting, it was voted to donate the remains of the monument to the Elberton Granite Association and return the five acres on which the monument sat to its previous owner.
Remember, for all the news in the hard surfaces industry, look for our online newsletter, Slab and Sheet, which alternates Wednesdays with Radio Stone Update. For a transcript of this podcast, go to our website at www.radiostoneupdate.com. For Radio Stone Update, I’m K. Schipper, joining Emerson Schwartzkopf in wishing you a happy holiday season, and we’ll see you here again in 2023.
