The US stone market in 2014
As the biggest stone market in the world, with total imports of US $ 2.8 billion in 2013, the US market trends are of the highest importance to many stone processing factories all over the world. The financial crisis and the collapse of the housing market in 2008 in USA caused great harm to hundreds of stone exporters from all over the world who were left with unpaid bills as hundreds of stone distributors and workshops (or fabricators as they are known in that country), went bust. 6 years later, at least in terms of volumes, the market has returned to pre-crisis situation, though in many ways the market dynamics are very different now. This magazine spoke to several highly experienced American businessmen working in the stone industry with presence in different parts of the vast country to get their impressions on the current state of the market, and how they see the future. We publish below their opinions.
According to Ravinder Johar, of Southland Stone USA, based in North Hollywood, California there has been no new construction taking place in California so far. He says the sales of quartz stone increased by 40% during 2013. But he also thinks that quartz has reached its peak in the market, according to him its applications in apartments has a limit. Whenever there is a luxury home being built, the owner inevitably chooses natural stone over artificial alternatives. Johar also makes a very bold prediction when it comes to analyzing the distribution structure of the stone industry in United States. He says that installers always want to buy directly from source, and this is changing the distribution network, and he thinks that in 5 to 7 years few distributers will be left since installers will be buying directly from the stone processing factories of the world. He also thinks that the east coast of US is more active than the west coast.
Jeffrey Matthews, of Trade International, Inc, Atlanta, an industry veteran, thinks the residential market has been picking up steadily. If growth in this segment was 17 % in 2013, 40% growth is expected during 2014. Regarding the segment of commercial construction, he says that in terms of specifications for projects there has been an increase of 15-20% over last year. The types of commercial projects that are coming up tend to be hotels, museums, churches and offices. Typical size of projects as of now is from 1000 to 7000 sqm jobs, and about 5-10% of the projects being currently quoted for natural stone are in excess of 10000 sqm. Matthews clarifies that many of these projects actually started 6 years ago, were halted due to the crisis, and now are coming back in the market. There are also big residential upscale projects varying in size from 1000 to 5000 sqm, and this segment is seeing growth. The significantly increased number of quotations taking place makes him predicts that 2015 will be an even better year for the stone industry in the US. Regarding artificial alternatives, he says that porcelain is focusing on textures and lately they have been copying the natural wood look. According to him white marble is now in fashion and the demand for white is growing steadily.
Nevzat Kansu, President of N E K A , whose geographical reach in the stone industry as fabricator extends to Virginia, Washington, Maryland, Delaware and some more areas on the East Coast, still does not see steadiness in the market. In the first months of the year the bad weather affected business leading to all kinds of delays. But even now, as he puts it, “We see the light at the end of the tunnel, but we would like the light to be brighter”. Overall, his observation is the US is still a very price conscious market, but even in this aspect they reject low quality materials. However, he does acknowledge that in the high end market there are many people for whom price is irrelevant, and that this is also a significant market in the US.
Magd Riad, Managing Director of Marmi USA, based in Atlanta, focuses on the high end segment of the market. According to him there is definitely a recovery in the US, especially in areas like South Florida, South California, Boston, D.C. He does, however, point out that things are not like the pre-crisis times of 2006-2007 and people are much more price conscious now. As an example he mentions that potential customers now do a lot more comparison and ask for 3 to 4 bids before making decision on their stone supplier. He also sees recovery in commercial construction. As for which materials are now in fashion Maged Riad confirms what everyone seems to have noted- that white coloured stones are more popular now. Quartzites are also in greater demand. His opinion is that buyers have moved away somewhat from marble because of maintenance issues. Overall, regarding prospects for the next 2-3 years he is quite optimistic that good times are ahead.
For the purpose of this article stone exporters from other countries were also contacted for their impressions of the current state of the US market in natural stone. Almost without any exception, exporters from Turkey, India, Brazil and Spain, in particular, all mentioned delayed payments (assuming they get paid) from their US buyers as the biggest issue, and they were not really concerned about sales volumes, quality issues or other market trends. Without getting into names, one got the impression that some major stone companies have even decided to treat the US market as of secondary importance. The realization has grown among many processing units that increased sales in US is a meaningless figure, and that delayed payments from US buyers means need for unacceptably high working capital requirements. From the factory owner point of view, the time lag between paying for blocks (often in advance), and for receiving payments of orders delivered can be from three to six months, or even more, placing huge stress on cash flows. For these exporters, the potential and attractiveness of the US market needs to be examined basically within this framework. Big volume wholesalers in America are not considered as important clients for some major granite and limestone manufacturer
In other words, the recovery in the US market for stone, while a welcome development, also has its negative aspect. It may even be possible to argue that natural stone might end up losing market share in the United States to the imitation materials not because of changing customer preference, but something as basic requirement for extended credit terms which natural stone suppliers from the world cannot fulfill. Ravinder Johar´s observation that the distribution structure in the stone industry in the US is heading for major change can be better understood within this context- not only stone installers are going directly to suppliers, but stone exporters from the world may also be tempted to (once again) set up their own warehouses in the US as a way of getting around the problem of delayed payments. Whatever happens, the story of the US market for natural stone is going to be a more complex one- and not just about increased sales and margins and different materials now being in fashion. Watch this space- there will be a lot of things to say in the future!