November 9/16; Volume 30/Number 11
By Ken Ryan
The U.S. ceramic tile market is on pace for its sixth consecutive year of growth with 2015 sales expected to increase an estimated 8% to 12% in volume, according to executive forecasts and the Tile Council of North America (TCNA). Despite ongoing labor shortages and a somewhat tepid housing industry, the ceramic market continues to be one of the strongest performing sectors in flooring.
“In spite of slower-than-expected improvement in U.S. housing and remodeling over the past year, we continue to see growth in ceramic tile,” said Gianni Mattioli, executive vice president, Dal-Tile. “We anticipate that the close tie between new housing starts and ceramic tile consumption will be confirmed in the year ahead.”
The TCNA reported in October that midway through 2015 the U.S. ceramic tile market was up 11% in square footage vs. the first half of 2014, well on the way to another year of growth.
Ceramic is closely tied to new home sales, which continues to show slow improvement with August’s new single-family home sales up 5.7% from July 2015. However, new home starts were at a seasonally adjusted annual rate of 1,126,000 units, down 3% from July 2014.
“Overall the market is up,” said Bob Baldocchi, vice president of marketing and sales support at Emser Tile. “Everyone’s feeling is that it has been a good year. I wouldn’t call it a great year because in certain categories, like new construction, the market hasn’t been real strong.”
Sean Cilona, director of marketing at Florida Tile, added, “Everybody I’ve talked to seems to be positive. They’re running at capacity or close to it. ASID [American Society of Interior Designers] just published a report that showed we are back to pre-recession numbers in terms of full time designers back to work.”
Lindsey Waldrep, vice president of marketing for Crossville, said the company has seen a lift in the residential design segment. “This correlates with the recovery in the housing market as well as homeowners feeling more confident in the economy and taking on large scale remodeling projects.”
Imports vs. exports
According to TCNA and the U.S. Commerce Department, through the second quarter of 2015 911.1 million square feet of ceramic tile arrived in the U.S., a 10.3% increase from the same period in 2014 and an 8.8% increase from Q2 of 2013.
Import penetration was 67.9% through the second quarter of 2015, down from 68.7% in 2014. China remained the largest exporter to the U.S. in square feet with a 29.7% share of U.S. imports. Mexico was second, accounting for 28.5% of imports followed by Italy with a 17.4% share.
Italy remains the largest exporter to the U.S. on a dollar basis through the second quarter of 2015, comprising 33.8% of U.S. imports. China was second with a 26.5% share, and Mexico was third with a 15.6% share.
U.S. exports through the second quarter of 2015 were at 20.3 million square feet, up 13.9% vs. the year-ago period. The vast majority of these exports in square feet were to Canada (55.3%) and Mexico (18.4%).
Waldrep said one challenge the U.S. market is facing is increased domestic production as well as increased importation of foreign products. “That means supply is at a maximum and competition is intense while tile consumption is only now increasing in line with construction starts.”
Labor shortage effects
The shortage of installation labor affects all flooring surfaces, most acutely tile because of the degree of difficulty in tile setting and the lack of qualified installers. The labor issue is particularly troublesome because residential remodeling makes up 47% of tile consumption and new residential construction comprises 25% of ceramic sales. Within the new residential segment, it is estimated that approximately 75% of the sales are in single-family homes and 25% in multi-family.
CastleRock Communities, a Houston-based builder, reported in October that it now needs an average of 155 days to complete a house, up from its historical average of about 115 days. One of the main issues is finding enough people to lay tile, according to Lance Wright, a partner in CastleRock, who said everything that used to be a three- to five-day lead time is now three weeks to 30 days.
According to The Wall Street Journal, there are about 675,000 fewer construction workers than are currently needed nationwide for home building. This includes plumbers and electricians in addition to flooring installers.
“The lack of labor is rearing its ugly head in all segments but mainly in the new home construction business,” Baldocchi said. “The inability to close homes to keep up with demand is slowing down the overall market.”
Cilona said the U.S. is trailing other countries in the quality and quantity of skilled labor. “True craftsmen are hard to come by. A lot of installers who work for major builders don’t have the training. There are organizations trying to help but you still run into unskilled labor out there, and that is a difficult challenge for our industry as the barrier to entry for tile installation is higher than it is for other flooring solutions.”
As digital printing technology evolves from trend to mainstream, it is creating new markets for consumers who want the look of wood, stone or other blended visuals with the performance and durability of tile. “We’ve only just scratched the surface with what we will be able to develop,” Mattioli said.
Advances in inkjet continue to fuel opportunities to bring other trends such as textures, looks and large formats (8 x 72, for example) to the marketplace that didn’t previously exist or were hard to achieve by other processes. “There are almost no boundaries to what we can create and therefore everyone is looking to test the boundaries with this technology,” Baldocchi noted.
Cilona said in order to be competitive in today’s marketplace a manufacturer has to employ the latest digital technology or be left behind. The big players are investing in manufacturing capabilities with newer, faster and more technologically advanced equipment along with superior materials.
Executives explained manufacturers of digital printing devices will continue to find ways to combine other technologies with their machinery to create even more sophisticated products that closely emulate not only natural stone but also textiles, woods, metallics and other visuals that benefit from depth of color, specialty glazes and sophisticated graphics.
“Digital print technology—combined with other manufacturing techniques—has allowed tile manufacturers to create very convincing wood looks,” Waldrep said. “Now more than ever, these wood-look tiles are completely on trend in the residential and commercial markets. Likewise, we’re seeing notably increased specifications for porcelain tile panels as these collections allow specifiers to incorporate the beauty and performance of tile on surfaces and in ways they couldn’t before. As technology advances so do the great looks and solutions that can be provided.”
Growth plans support category
Ceramic tile companies have recently stepped up their growth efforts through plant expansions and acquisitions. Mohawk, for example, is building a $180 million, 1.4 million-square-foot ceramic tile plant in Dickson County, Tenn., that will open for business in the first half of 2016. The manufacturing and distribution facility will employ 320 workers in the production of Daltile, Marazzi, American Olean, Mohawk and Ragno brands.
Additionally, Florida Tile recently announced it was making a $25.2 million investment to expand its operations in Lawrenceburg, Ky. The project will allow the company to add manufacturing lines and equipment as well as expand its distribution center.
Crossville announced the acquisition of Capco Tile & Stone, a Denver-based distribution business that will join forces with Crossville’s existing company-owned distribution arm, Crossville Tile & Stone, which has a presence throughout parts of the Southeast U.S., Oklahoma and Texas.
Foreign investment is also occurring; the Wonderful Group, a tile and ceramics manufacturer based in China, just announced a $150 million investment in a 500,000-square-foot manufacturing facility in Tennessee.