Anil Taneja,
January 2021
Amidst all the ups and downs of daily business in the natural stone industry, economic crises that are local, or regional, or global, the disruptions caused by Covid-19, etc.it is easy to forget there are some megatrends that have been taking place over several years, sometimes imperceptible, but which end up having a profound effect on the prospects of individual stone companies and for a particular industry cluster.
As the year 2021 begins, and industry professionals soon return to their offices, it might be useful to reflect on some of these trends highlighted below, they have already been part of our business environment for sometime now, but their importance may not have been fully grasped by most people.
1. The shift in the centre of gravity of the natural stone industry extraction and production taking place from the developed world to the developing countries. Quarries of new materials are being opened in the developing world in countries like Brazil, Turkey, Iran, China and India, etc.all the time. However, in Europe, the traditional benchmark for all significant developments in recent decades, there is little left in terms of discovering and mining new stone quarries. In fact, total stone quarrying in the developed world has probably reached a plateau or may even been declining.
2. Shortage of skilled labour almost everywhere in the world. The natural stone industry has never really developed an established and institutionalised system of training of new entrants to the industry in areas of quarrying, processing or installation anywhere. Moreover, demographic trends, especially in the developed world, mean there is a severe shortage of skilled labour in almost all industries, not just in natural stone. There is shortage of skilled people also in the developing world, in countries where the industry is still relatively dynamic. The consequence of this shortage, and with no solution in sight, is that it has led to a big uptick in investments all over the world in machines for labour substituting automization processes, both in companies big and small, companies that may not be growing, or even doing especially well.
3. Commoditization of the vast majority of materials that have been present in the market for several years. It is not a question of prices being under pressure for colours currently not in fashion. The never ending pressure for lowering prices at all stages is due to several reasons: a larger and constantly increasing number of new stones appearing in the market, all trying to claim their quota of market share, the reluctance of the industry people in experimenting with new finishes and textures and applications, the ever growing competition, etc. The end result is there are very few materials that are considered to be in the 'Premium' category, no matter what be the colour, availability, whether it has movement or not, it is exotic or not. Prices are almost always heading downwards for intermediate products, keeping the margins tight(except when devaluation of the local currency gives the exporters an additional, if temporary, cushion). This phenomenon, incidentally, happens in just about every industry- just think of any consumer good and this trend of price pressure becomes evident.
4. The predominant place of China in international trade of natural stone that has lasted over the last 25 years, as a buyer of raw material, and as an exporter of processed stone at unbeatable prices, has been somewhat eroding over the last 5 years or so. At the peak period of construction boom just less than a decade ago, China accounted for probably around 50% of world natural stone consumption. China was also always a strong competitor even in projects of low value added thickness stone used in pavements, transported over long distances to the European Union, for example. Environmental concerns have lead to hundreds of stone quarries in China being closed in recent years. Moreover, China is no longer a low cost country, every type of input cost there is much higher today than just a few years ago and these costs seem to keep
increasing all the time. For many mining companies all over the world, China was the main, often, the only market, for blocks of their stones. And very lucrative. Only the Chinese were capable of buying just about any kind of blocks, they used to be not very demanding and selective either. Payment from them was also not a problem. However, this 'retreat' may perhaps be temporary. China is geographically a big country and new stones mined in a rational and modern way in new areas may well appear in the international markets at any time. For now, the reduced competition from China, based almost exclusively on low prices, is providing an opening and some relief to stone suppliers everywhere.
5. Technological innovation has transformed the porcelain industry from being considered as ' parallel' to the natural stone industry into an alternative and a formidable direct competitor, threatening its very presence in applications where natural stone was considered the material of first choice for decades. Be it kitchen countertops, facades, decoration, even pavings, just about in any application with 3 cm or less thickness where natural stone was king, the artificial materials in big format, small thickness, lighter, have been making serious inroads in the market share of natural stone. So far this phenonemon has been mostly faced in the high income countries. Aesthetically, even the professionals now often find it difficult to distinguish between the real natural stone and the artificial, me-too, industrial product. In many ways, this phenomenon is a contradiction of another global megatrend- the preference towards natural products. But then, never underestimate the power of marketing.
6. Sustainability, environmental friendliness, carbon footprint, etc. are no longer just fancy words used in seminars or added to websites to make the company look good, but criteria being increasingly taken seriously by architects everywhere in their projects when selecting building materials. In theory, this new sensibility should be of great advantage to the natural stone industry. In practice, however, the industry has still to educate itself on these key factors and learn how to use this trend to its benefit.
CONCLUSION
Every time a new year begins, the human mentality is to begin with a new mind and energy, and some degree of optimism, at least during the first few days. While that is a good approach, especially in 2021, when Covid-19 may finally cease to be the nightmare for people all over the planet, the industry people would do well to reflect on these silent but important megatrends as they go about preparing for the challenges ahead. At the end of the day, it is in identifying, understanding, reacting or adapting to these trends which will have the greatest consequences for the companies and not just doing better what they have always been doing.
