RISING PRICES CREATE UNCERTAINTY?
Oh how many in the stone industry worldwide took the Chinese natural stone producers to their financial bosoms!
Few could resist the temptation to try them after seeing them at exhibitions and very soon their products were to be seen everywhere, not only at the traditional stonemasons yard but also in the big D.I.Y. outlets and even small bespoke tile shops. Why? They were cheap, very cheap, and if one found a reliable and quality producer it was pointless to resist, meanwhile traditional producers/suppliers around the world were sent reeling by the "unbelievably" low prices.
Low labour, material and production costs were bandied about however the reality was that the Chinese stone industry was receiving huge governmental grants and export subsidies to expand its stone export businesses and that environmental concerns and safety standards were being avoided. Rumours of serious accidents in major quarries by unqualified personnel fuelled concerns consequently environmental protection regulations and the grants have been stopped which have all led to an increase in prices.
Some of the most well-known granite quarries have been temporarily closed creating shortages of these materials however whether this has been a deliberate ploy to try and increase prices or for genuine environmental and safety concerns, the international trade does deserve a truthful answer otherwise China may be seen as an unreliable partner for major project supplies.
Whilst the cost of all Chinese natural stones has risen there has also been another major cost increase which is always extremely significant to the stone industry - a massive increase in the cost of seafreight and this has had a major impact in the U.S.A.
Whilst these costs have also increased to Europe and other major consuming countries, their increases have not been as significant since the US Dollar has been depreciating however what will happen if/when the Dollar appreciates again as it most surely will?
Why has the cost of transport risen so much?
Without doubt there is a shortage of space on the container ships and many Chinese stone exporters will not quote a seafreight rate until two weeks prior to despatch. The Chinese export economy is growing fast and this effect impacts on container transport. “The cause of the rising transport costs is mainly the scarce capacity on the container ships,” explains Gerd Brouwer of China Shipping, the sixth largest container transporter in the world.
The freight costs for container transport from China have increased by up to 50 per cent in the last six months. The heavy 20-foot containers necessary for transporting natural stone cost several hundred US dollars more. Given the generally huge demand for container space on ships from China, the shipping companies’ interest in transporting heavy goods like natural stone is waning. Instead of the excessively heavy “20-footers”, they would prefer to load the 40-foot containers, which are twice as large and loaded with lighter goods – so more units can fit on the ship. The average load for a 20-foot container is 14 tons, but the exporters frequently declare 20 to 22 tons for natural stone. Unpleasant surprises are not uncommon when it comes to unloading containers that have actually been loaded with up to 35 tons. Brouwer sees no end to the rapidly growing transport shortages and price rises. On the contrary, all the statistics indicate that the flow of goods from Asia and the demand for shipping space will grow at a faster rate than the shipyards’ capacities for building new container ships.
Rising prices - less consumer choice?
Consumers used to having multiple choices of both quality and prices may soon find their expectations and shopping lists a lot shorter. Owing to these prices rises and transport cost uncertainties, it is inevitable that wholesale suppliers and importers cannot factor into their costings such enormous fluctuations, quotations with a very short-term validity may well become the norm until market conditions are much more predictable.
For example, the current cost of shipping a container from China to Europe varies between USD 2,150 to 2,400 plus some have surcharges of up to USD 800 and if you require an open top container, well, they seemingly no longer exist! It is also worth pointing out that container costs from India have also increased however not to the extent of those from China.
Is this good news for other producers?
Will this bring Chinese-produced natural stone prices more into line with their major competitors such as Brazil, India, Italy, Spain and Turkey?
Possibly, however it must be borne in mind just how many European stone factories have been closed or re-located in the last decade or so, in fact some countries, the U.K. is a perfect example, have no major processing units whatsoever, machine after machine has been decommissioned and sold...many to India and China!
It must also be remembered that for hand-made, finished products that there may not now be a choice of an alternative producer at present meanwhile at the bulk end of the market for some materials the Chinese purchase the entire quarry production and they may well be the only supplier for them.
The past 20 years has seen a dramatic transformation within the worldwide stone industry as primary stone processing costs were substantially reduced with the increased availability of much cheaper Chinese stones available for all types of commercial and residential projects. Many countries have seen the creation of entire new stone fabricating/processing sectors, the countertop/worktop market is a perfect example of this.
With unpreditcable price rises and insecure material supplies from China these new businesses may now have to adapt to this reality and reconsider whether "cheap and cheerful" is no longer acceptable when the customer expects quality and reliability.
As always "Caveat Emptor - Buyer Beware!"