An overview of the world stone industry

November 11, 2002
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Thinking of 2001, the first thing that immediately comes to mind is a general slump right from the start, even as early as the spring. This was dragged on by the September 11th events, which put off the recovery that had at first been expected to occur by the end of the year. However, the timely response by the economical and monetary institutions of the main countries of the world certainly helped to counteract these adverse effects. And the strength of the Western economies in general - building on one of the longest times of expansion since the end of the Second World War - then helped to do the rest by restoring the atmosphere of confidence that was needed to forget about the crisis. Thus, the negative phase seems to have been already overcome, even if slowly and with some considerable exceptions. And it now looks like the crisis is one of the least dramatic ones since the end of the Second World War, unless of course other unpredictable events come up and change the picture again.

Overall, 2001 was not a negative year, even if the consequences of some events may still have residual effects, such as the Argentine crisis or the repercussions of the Enron case. Additionally, the continuing crisis of the Middle East could affect oil prices, thus involving not only some macro-economic variables, but also the everyday lives of ordinary people and companies by raising transport and energy prices. In the last quarter of the year, the prices of raw materials generally decreased as a direct consequence of a weakened world demand. But energy costs are prone to be affected by other factors as well, even more so by politics, especially when it comes to oil or to such a delicate area as the Middle East.

It seems that a decisive role in the recovery is being played by the housing and building industries, especially in the U.S., which still act as propellers for the Western economies and beyond. If the building sector - and the housing sector in particular - remains high, other sideline businesses, such as the stone sector, will also be favorably affected. This, of course, is provided that this building increase does not dwindle away to yet another speculative bubble, as it has always happened over the last few years.

The year 2001 also saw another historical change, of which we cannot fully appreciate yet all the deepest implications. For European countries, 2001 was the last year their currencies were legal tender, being replaced by the Euro on January 1, 2002, and disappearing at the end of a double circulation period, the length of which differed in each country. The impacts of this at an economical level are quite under control; however, the political, cultural and psychological effects will be more deeply felt with the passing of time. A real assessment of the reaction to this change can be made later this year, after a summer of international travel and exchange by Europeans, especially young people. Reflecting back on this exchange at the end of the year, the real side effects can be examined, and it is expected that there will be a growing integration between different countries and peoples, not only monetary or economic ones. At this point, however, we cannot judge the consequences but from a historical perspective.

The stone sector in 2001-2002

Internationally, 2001 was generally a positive year for the stone sector in both the quarrying and processing areas, even though the last quarter of the year - with the slump associated to the September 11 attacks and the resulting war - caused international trade volumes to slump. The amounts of quarried materials are increasing, and overall consumption in particular is increasing - in some areas more than in others, with some fluctuations. Yet, if we add up all these trends, the result is still positive compared to past years. This shows that the developing trend - even when it has been slow or tricky

- has never stopped or really fallen back, and that has continued in 2002.

There are producers that have grown remarkably stronger and have gained ground in the international marketplace over the past couple of years, and others have even started to play a more significant role by turning from quarriers of stone materials to producers of slabs, tiles and other finished products. This has sometimes coincided with a remarkable increase in their imported quantities that are, at least in part, re-exported.

The great protagonist has no doubt been China. Although China is no longer a new entry in the stone sector, it can still take its competitors by surprise by looking different every time, and by cutting out a new role for itself in the international stone industry. China astonished everyone with an increase in its quarrying capacity, which has remained the most important and most impressive phenomenon of the last decade. And it is changing its clothes once again in the new millennium, as it has come out as a leader in other stone processing areas, such as marketing and finishing. As such, it has the ability to gain ground in new markets, such as those of the Middle East.

Over the past few years, China started supplying granite - including granite funerary items - to Europe and Germany in particular. These exports were not only Chinese granite, but also granite from other parts of the world. This phenomenon has very clearly extended and expanded, bringing this country to a leading position in the acquisition of materials from all major producers, especially granite from India, Brazil, South Africa and Norway.

Last year, exports of finished stone products from China made deep inroads in the U.S. market, particularly on the West Coast, which is the natural shore of Chinese commercial expansion. China's role has grown in the European Union market as well, and it has even landed in Italy - still somewhat experimentally for the time being.

Still very important are the performances of such countries as Italy, France and Spain, which are still experiencing a relatively favorable period with their products and materials. These have included French limestone and Spanish marble, granite and other stones, which have found an ideal partner in the U.S. market, which knows how to appreciate the characteristics and appearance of these materials and to use them at their best. The same applies to Italian and Portuguese marble, Norwegian granite and marble, and many other stones.

Quarry production has grown evenly in some areas that had already started to develop their own stone resources for some time. One example would be the Middle East and the southern coast of the Mediterranean in general, where trade among the coastal countries has continued to grow and where Syria and Egypt have now been included in the number of permanently involved countries. Current events have the potential to lead to some local destabilization in this region, by paralyzing trade to and from Israel and the Gaza Strip, which have put in place a laborious but appreciable campaign for the promotion of local stone. However, this is the last of consequences to be looked at, compared to others of much greater scope; yet, economic activities are the backbone which supports all areas of civil life and which helps to increase not only wealth, but the quality of life itself.

There are still other countries in the area that are continuing the growth trend, first and foremost Iran, now growing as an international player and as a stone producer and consumer. But any possible development of the local industry, at least with regards to future trade, has to take into account the endless uncertainties on the potential effects of threatened or promised military actions in the entire area. In the Far East, India has a peculiar state of affairs, certainly not as a producer but as an importer, since the decision to raise barriers against imports from some countries, even if recently relaxed, has nevertheless affected its relationships with some important stone-producing countries. Yet again, the novelty is China, which is more and more of a leader in the entire sub-region, with a growing common sector of minor producers and consumers that, taken together, make up a sizeable stone industry.

A basic level of production and consumption as well as trade - both locally and with the great North American market - is still alive in Latin America as well, providing a sure benchmark ceiling for the sector. Brazilian materials are still very much sought after, and they are being processed locally more and more frequently. However, the other great potential producer, Argentina, is hardly able to take off due to the well-known and worrying events, despite possessing high-quality resources and prestigious materials.

The international market

Overall, the past 18 months have seen further growth in the international trade of raw and finished materials, even with the traumas during the final quarter of 2001. A distinction has to be made, however, between what occurred in terms of raw materials, especially granite, and what occurred in terms of marble and granite semi-finished and finished goods. We have seen the quarrying of raw materials continue to grow, sometimes slower and sometimes faster, depending on the country.

The Americas have become more and more of a supplying system that has risen its threshold of independence in the stone industry. Canada, the U.S., Mexico and Brazil in particular are producing more raw materials and slabs as well as finished goods - even if more moderately. The most significant center of attraction is the U.S., which is importing materials and goods from all over the stone-producing world.

As already mentioned, stone businesses from all over the world are by now used to meeting Chinese operators in all the major markets of raw materials, especially granite, and in all the major tenders for contracts, even when one would expect to meet the usual competitors only. And so the total exports of the area - taking together the whole of the two countries of which it is composed - are consistently growing, not always evenly, but certainly with a very clear expansion.

Exports from China are also changing in nature, with block exports slightly decreasing and finished goods increasing. The rate of growth has been quite consistent, and the year 1999 was the last year in which block exports grew. Since 2000, there has been an overtaking by finished goods, and it's not to be expected that the situation will ever revert. On an international level, there is a general feeling that this situation is challenging the rest of the world and that these materials and products are also helping the sector to develop everywhere.

Less lively are the moves of the other great Asian producer and consumer, India, which continues to be one of the greatest suppliers of raw materials, mostly consumed by the domestic market. We do not include all of their stones in our products' table that we want to be the same for all producer countries, but, for all that, India remains one of the leaders of this industry and a rival of China for supremacy. Unfortunately, official export figures sometimes leave doubts on the consistency of the classifications made for recording purposes, but in any case, the past 18 months do not seem to have been too dazzling for this country. Competition from the other Asian giant, that among other things also buys from India, must have begun to be felt on some major markets.

What is left is therefore a narrower and narrower and more and more specialized competitive margin for European producers and fabricators, which will have to rely, above all, on their domestic markets. This client base is certainly very demanding, for they are used to high quality standards. Stone producers will also have to rely on their specialization if they want to continue to play an active market role, a role suited to their actual skills and to their past and recent history.

Stoneworking machinery

Italy remains an international leader in stone machinery and technology. However, there has been a slight decrease in overall exports, despite expansion in primary cutting machinery. Secondary processing machines (i.e. surface and edge polishing and finishing machines) suffered a bit, with a decrease between 5 and 6% in exported amounts and values.

Non-EEC Europe is still stable, at least in amounts, while the European Union is suffering more, which suggests the traditional European stone industry is not expanding as a whole. As a matter of fact, some of the emerging international markets that have hampered the Italian stone producers - such as those in the Far East and the Middle East - are doing the same to the other European stone products as well. However, these countries remain absolutely essential as technology importers. Africa and the Middle East have increased machinery imports, which proves the importance of the role played by the Mediterranean area in the international development of the sector, while the Far East keeps growing, especially in the import of processing and polishing machinery. This indirectly proves that the local sector is specializing more and supplementing the types of finishing that are most frequently demanded by the foreign markets. In the Middle East, Iran, Israel, Jordan, Saudi Arabia, Qatar and the United Arab Emirates, along with Tunisia, Egypt and Morocco, are all growing. Above all, cutting machine exports are growing the most, but finishing machines make up by far the largest share of Italian stone equipment exports, following a trend that has been active for many years. Much of the focus remains on the Mediterranean, including Turkey and Greece. All of these countries however have their own resources of materials, use and trade traditions in which stone is developing, but also a way to establish cultural contacts with their neighboring countries. And above all, these are countries that have a future in the stone industry - a future of trade, use and expansion.

Conclusions

It is very difficult to express one's final judgement on the past 18 months, which have gone through many unusual events. No sector has escaped the maelstrom of 2001's final quarter, and the stone sector has to take into account its immediate and future consequences. If there is any sign of expansion in the world's economy, this is above all associated to the second half of 2002. There are clear signs of recovery in the U.S., some weaker ones in Europe, stronger ones in the Far East, often accompanied and supported by the housing and building prices concerning both new and old property. Low interest rates have actually boosted demand, which has tempted buyers to get into debt, sometimes even leading to a high demand for second homes. Because fast share investments have lost their attractiveness of late, income on real estate has begun to be viewed by many investors, especially small investors, as safer and more reliable. If rates should abruptly rise, especially in some particular countries and regions, the future would look less rosy for the building industry and consequently for the stone sector.

But generally speaking, the stone sector is continuing to expand; a process that is not even, but has clear general trends. There have been changes that have brought the new producers - or producers with new characteristics - that are expanding, gaining new ground and are working to become part of the international model. This includes only the People's Republic of China, but also Iran, and North Africa and some Eastern European countries, which are now offering traditional stones that can be admired on so many historical city centers and ancient monuments.

There is also the continued marketing campaign being conducted against natural stone by the ceramic industry, which imitates the beauty of stone and boasts that they have the same attractiveness but none of their faults. This campaign contains all of the threats that an organized and cohesive industrial sector can pose to a small and objectively weaker one. But for the stone sector, this also acts as an indirect confirmation of the potentials that still exist in the tiling and flooring market.

There is still an irrepressible attraction to the beauty of natural stone, which is proven by the expansion of the world's market. It's important that stone be made accessible, both in terms of market and in terms of image. Stone must look natural in all respects, and it must also be easy and close to the end consumer. But all this needs to be done in keeping with its value and features, which have gone with it all through its history.

Research, when applied not only to processes but to products as well, can help to suggest new solutions to solve the problems of competition with other sectors. The use of computer numerically controlled stoneworking equipment has led new countries to quickly fill the gap, even if this technology is difficult to

use accurately and requires high maintenance. It is the fruit of applied research that has helped shape the way the sector looks today. Applied research and experimentation can still make a difference and guarantee better use of a natural resource which needs to be further promoted and supported.

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