One-on-One…with Andrew Whitmire
 
May 2nd, 2008

What do the numbers say about the U.S. Tile Industry in 2007?

May-June 2008

The Tile Council of North America (TCNA) presents a statistical look at the U.S. tile market annually at Coverings. Their review includes domestic production, imports and exports. As such it is a valuable look at the industry here and abroad. In the last decade, consumption has increased 32%!

This year, TileDealer is pleased to be previewing this report. Despite a significant downturn in some numbers, TCNA’s Andrew Whitmire points out that the report reveals some interesting trends in the industry.

TileDealer: How long has the Tile Council been doing this study of the marketplace? Why? How has the breadth of the study evolved since it was first done?

Whitmire: This is the third year I’ve been tracking tile data. Before I started working with the data in-house, an outside firm compiled the tile data. The outside firm did not include housing or other economic data, which have been added. We track the data to keep up-to-date with the marketplace and as a benefit to our members.

TileDealer: Can you offer a little background on how you gather the numbers. What sources do they come from? How much analysis do you have to add to achieve the review you presented here?

Whitmire: All the tile data comes from the U.S. Commerce Dept. Housing information also comes from government sources, which are listed at the bottom of each graph (e.g. Bureau of Economic Analysis, Freddie Mac, and U.S. Census). For my analysis, I review the data, the trends they reveal, and report on them. I also read articles from several industry publications to help keep current.

TileDealer: What are the conclusions TCNA is drawing from the report?

Whitmire: Drawing off the housing data presented on the last page of my article, we don’t expect a bounce back in the industry this year, given the state of the housing market.

TileDealer: How did the tile market perform in 2007?

Whitmire: The U.S. ceramic tile market had a major downturn last year, following the trend of the declining housing market. Total tile consumption was at 2.67 billion sq. ft. This is down 19.5% from 2006 and the lowest consumption has been since 2002. It is also the first time since 1994-95 that total consumption has decreased from one year to the next.

The main decrease in consumption came from imports, which were down 20.3% from 2.73 billion sq. ft. in 2006 to 2.18 billion sq. ft. in 2007. Domestic shipments were not down as much (14.4%), and exports actually increased 5.3% over 2006 figures (see table 1).

This decrease comes on the heels of record growth in the industry (see chart 1). In the last ten years, we have seen consumption increase 32%!

TileDealer: What about imports? From which countries does the U.S. get the most imports? What are the trends there?

Whitmire: Imports continue to make up a large segment of the market. In 2007, 81.6% of tiles consumed in the U.S. were imported, compared to 64.2% ten years ago and 51.9% twenty years ago. However, imports’ percent share of the U.S. market (in sq. ft.) did fall slightly from 2006, in which import penetration was 82.4%.

Ten years ago, three countries—Italy, Spain, and Mexico, dominated U.S. tile imports, making up 78.3% of total tile imports (in sq. ft.). Today, Brazil and China have joined them as the top exporters of tile to the U.S. In fact, tile from these five countries now constitute 84% of U.S. tile imports.

In recent years, consumption has shifted away from the more expensive European imports towards tile from countries such as China, Brazil, and Mexico, which have lower labor costs. Many Italian companies have invested in building factories in the U.S. such as StonePeak, Florim, American Marazzi and Panariagroup. Mexico benefits from lower tariffs, shipping costs, and lead time in getting their products to the U.S. market. With the rising cost of fuel, shorter distances lower transportation costs and can make a big difference in the price eventually paid by the consumer. The weakening dollar also contributes to the increasing cost of European tile.

In 2007, 2,178,258,074 sq. ft. (202,366,797 sq. m) of ceramic tile arrived in the U.S. This is a decrease of 20.3% from 2006, in which 2,732,199,108 sq. ft. (253,829,603 sq. m) of ceramic tile were imported into the U.S. This is also a 17.4% decrease from 2005 (2,638,336,636 sq. ft. vs. 2007 total of 2,178,258,074).

China was the only one of the top five countries (from which the U.S. imported tile) that made gains in 2007—up 1.4% in sq. ft. and 4.6% in dollar value. Also of note, China passed Brazil for third place behind Italy and Mexico in tile exports (in sq. ft.) to the U.S. China also passed Brazil in dollar value in 2007 and is now fourth behind Italy, Mexico, and Spain.

Chart 2 illustrates the changes in percent share of imports from the five largest exporting countries. Note the dramatic rise China’s share of tile exports to the U.S.—from 0.2% in 1997 to 16.1% in 2007!

TileDealer: What are the key economic drivers for the industry showing?

Whitmire: GDP: Real GDP increased at an annual rate of 0.6 % in 4Q 2007 (advance estimate). Real GDP increased 4.9 % in 3Q 2007. (Source: Bureau of Economic Analysis)

Housing Starts: New home starts were down 25.8% from 2006 to 2007. New home starts for Jan. 2008 were at a seasonally-adjusted annual rate of 1,012,000 units. This is a 0.8 % increase from Dec. 2007 and a 27.9% decrease from Jan. 2007. (Source: U.S. Census Bureau)

New Home Sales: For the year 2007, new home sales (773,000) were down 26.3% from 2006 (1,049,000). New home sales for Jan. 2008 were at a seasonally-adjusted annual rate of 588,000 units. This is a 2.8 % decrease from Dec. 2007 and a 33.9% decrease from Jan. 2007. (Source: U.S. Census Bureau)

TileDealer: Where do you think the market will be in 2008?

Whitmire: According to the National Association of Home Builders (NAHB), the housing market is expected to bottom out around mid-year and to be down a total of 22% in 2008, on top of the 26% drop in 2007.1 The National Association of Realtors (NAR) projects new home sales to be down 13.5% in 2008 and then to rebound in 2009, rising 9.1%.2

Additionally, due to credit problems, foreclosures and the sub-prime mortgage predicament, consumers are expected to spend 14% less this year in remodeling projects.3

With new home sales, housing starts, and remodeling all down, and with 1.25 million foreclosures last year and that number expected to grow in 2008, we expect to still see downward pressure in 2008 in the tile market, which is closely linked to the success of the housing industry.

1 BUILDER Online News Service; February 13, 2008

2 BUILDER Online News Service; January 8, 2008

3 KBB Online; Industry Forecast, January 2008

Table 1
(In thousands sq. ft.)

% Change in Consumption from

Year U.S. Shipments Imports Exports Total

Consumption

Previous Year
2007 539,156 2,178,258 47,478 2,669,936 -19.5
2006 629,672 2,732,199 45,107 3,316,764 1.8
2005 658,198 2,638,359 37,022 3,259,535 3.5
2004 695,386 2,488,181 34,727 3,148,840 11.8
2003 614,955 2,231,188 28,938 2,817,205 6.6
2002 649,488 2,034,634 41,705 2,642,417 16.2
2001 591,080 1,716,371 33,306 2,274,145 0.5
2000 620,064 1,685,716 42,685 2,263,094 8.4
(Source: U.S. Commerce Dept.)

The top five countries from which tile was
imported in 2007 based on sq. ft. were:

Country Sq. Ft. 2007 Sq. Ft. 2006 2007/2006 % Change 2006/2005 % Change
Italy 523,623,382 660,815,836 -20.8% -4.1%
Mexico 439,945,248 452,002,163 -2.7% 10.6%
China 351,285,136 346,463,033 1.4% 53.9%
Brazil 297,835,862 430,279,074 -30.8% -4.8%
Spain 215,157,211 346,178,952 -37.8% -5.0%

The top five countries from which tile was imported in 2007 based on total U.S. $ value (including duty, freight, and insurance) were:

Country Tot $ Val 2007 Tot $ Val 2006 Tot $ Val 2005 2007/2006 % Change 2006/2005 % Change
Italy 889,642,881 1,040,504,857 1,033,038,229 -14.5% 0.7%
Mexico 262,877,966 275,234,007 250,987,708 -4.5% 9.7%
Spain 256,022,948 368,532,372 356,599,093 -30.5% 3.3%
China 225,580,029 215,627,028 134,326,030 4.6% 60.5%
Brazil 185,887,442 268,145,063 276,227,319 -30.7% -2.9%

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