Guest column: The great urbanization, threats/opportunities

Home Columns Guest column: The great urbanization, threats/opportunities

Part 1 of 2

by Jim Gould

In this two-part series we address two converging forces that will impact the world’s economy and affect demand for finished flooring, its raw materials and even where the flooring will be made. Threat or opportunity? In the near future Asia will not be able to meet its domestic demand for flooring, it will consume more timber each year than several countries can harvest, and the balance of supply and demand will shift from the West to the East.

Emerging trends

Spotting and acting on emerging trends is how companies take advantage of market opportunities. Over the coming decade, two global trends—urbanization and a shift in supply and demand caused by emerging markets— will profoundly reshape the global economy and, by extension, the floor covering industry in a surprisingly direct manner.

According to McKinsey & Co., more than 70 million people are joining the ranks of the middle class each year, virtually all in emerging countries. By the end of the decade, the globe’s middle class will have doubled. Emerging markets will no longer be suppliers of lowcost goods and services, they will be consuming economies with huge demand for goods and services—half of the world’s work force and half of the world’s new construction will be in emerging markets.

Asia’s cities will hold 54% of the world’s urban population creating the largest work force ever known. Already its labor productivity is growing five times faster than in the West. By 2025 nearly 2.5 billion Asians will create an unprecedented shift in supply and demand, not the least of which will be floor covering for the billions of square feet of new construction required to support the urbanization. If estimates are correct, Asia will add more than 30 billion square feet of floor space a year to support its migrating populations. China will account for two-thirds and India the rest. Consider that most of the flooring in Asia is hard surface; in China it’s about 90%. Now consider in 2009 the U.S. hard surface flooring market (new plus remodel/replacement) was 5.66 billion square feet. Asia’s huge demand will surely create opportunities for Western mills to become suppliers to this growing market. It will also stress the supply of many raw materials.

Impact on timber

By 2015 the gap between China’s supply and demand for timber will exceed Canada’s entire timber harvest in 2009, according to International Wood Markets Group.

Canada has increased its lumber exports to China by almost 800% in the last four years making China the largest importer of North American wood. China is already the world’s largest manufacturer and consumer of wood-based flooring, panels, furniture and doors causing difficulty for the country to meet its current demand for timber. Its panel board output in 2009 was more than triple that of North America.

China’s wood flooring usage has increased domestically 7% to 8% annually and some of its capacity and raw material supply has already shifted to fill domestic demands.

Some U.S. mills that opened a plant in China to supply North America have realized the better strategy is to redirect those factories to supply the burgeoning Asian market.

Is the global industry ready to recognize and act upon the threats and opportunities these converging trends will cause? We’ll discuss that in part two.

Must Read

Mirage launches Escape, DreamVille collections

Saint-Georges, Canada—Mirage has introduced two new collections: Escape and DreamVille. The Escape collection features brushed and engraved surfaces, while the DreamVille collection contains highly...

NAFCD, TISE partner for 2020 event

Chicago—The North American Association of Floor Covering Distributors (NAFCD) and The International Surface Event (TISE) have extended their partnership in 2020. TISE 2020 will take place Jan. 28-30...

Xpress Global Systems opens service center in Indianapolis

Chattanooga, Tenn.—Xpress Global Systems (XGS) is strategically expanding into the Indiana market by opening a new service center in Indianapolis. The company expects to...

I4F presents winner of new annual Valuable Ideas award

Hannover, Germany—I4F, a group of companies providing patents and technologies to the flooring industry, has awarded Yoon J. Koh its new Valuable Ideas award for...

Karndean encourages dealers to focus their flooring vision at TISE

Export, Pa.—Karndean Designflooring will unveil more than 40 new colors spanning four product ranges at The International Surface Event (TISE), held Jan. 28-30 in...

Measure Square introduces new products built on measuring platform

Pasadena, Calif.—MeasureSquare, a leading developer of flooring software and apps, will launch its next-generation measure estimating platform at Surfaces 2020. New features include integration...