Mid-2007 – A Level Market?

Two of the hottest stone groups for import in recent years – granite and travertine – will cool off from a torrid growth rate. Marble demand appears healthy, but dockworkers won’t be working as hard moving slate through ports-of-entry.
The data on stone imports already shows a flattening of the growth curve, when compared to the last five years. Unless demand grows for stone at an unusually high rate – something that’s unlikely to happen, given the economy and lower housing starts – 2007 dimensional-stone imports could fail to set the usual record high.
The bottom’s not falling out of the stone market; it’s more a case of supply and demand finding a constant cruising altitude. Growth won’t be at the frantic pace of the early 2000s, but the calmer market should allow the industry to catch a collective breath.

PERILS OF PREDICTION
Forecasting market trends is, no matter how exhaustive the research, still a guessing game. Trying to figure out the final numbers on 2007, based on a half-year’s worth of import-stone data, can be risky. However, it’s worth a try.
The movement of dimensional stone into the United States is the important – if not only – way to draw a bead on market performance. For one thing, the statistics collected by the U.S. Customs Bureau are the sole reliable public source of monthly information for gauging stone demand.
While the size of the import sector can be disputed – it’s been pegged by researchers between 75 percent and 90 percent of domestic use – it’s big enough to show general dimensional-stone demand and value. The dominance of import stone in the top-demand and top-dollar fields of countertops and interior walls/flooring makes it a good indicator of the market.
Trying to get a handle on 2007’s possible market performance by factoring in general economic data, such as the inflation rate or new housing stars, can be timely but deadly. Stone sales bucked a number of trends in the past 10 years, such as getting less expensive in price when values are adjusted for inflation. Instead, let’s take an historical look at import growth rates for various stone categories.
To get a benchmark, I took the past five full years of data – from 2002-2006 – and developed totals for January-June and July-August for each year. That revealed an average half-year import rate that could be applied to the first six months of 2007. (For example, using a five-year average, 44.89 percent of slate is imported in the first half of the year.)
As a check against any wild fluctuations in those five years, I also pulled 2006’s first-half/second-half import rates and used those to make another estimate. As the numbers from last year indicated a less-steep growth rate, they offered a possible dose of reality against some incredible historical spurts in the market.
Using the half-year averages accounts for annual construction cycles. As a result, the yearly first-half imports rates for all six stone types – granite, marble, travertine, slate, other calcareous and the omnibus of other – didn’t vary by more than seven percentage points in all but one of the 66 different classifications of material value or tonnage imported.
It’s not completely scientific, but using the half-year data should reveal a good sense of the market for all of 2007. The following are forecasts, with a 3 1/2 plus-minus margin. The test of accuracy will come next May, with a full review using actual, not estimate, figures.

GRANITE
2007 import value: Flat/slightly down
2007 import volume: Down
Granite forms the backbone of today’s U.S. dimensional-stone market. In 2007, the posture remains sure, but the wonder years of dynamic growth are on hold.
For the first half of 2007, the import value of all granite imports totaled $707.4 million, down 3.4 percent from $732.4 million for January-June 2006. That’s an abrupt change from the situation last year, when that $732.4 million half-year figure accounted for a 26.1-percent increase from the first six months of 2005.
The Big Four of granite – Brazil, China, Italy and India – maintained that order with import values through the first half of 2007. However, while Brazil and China imports increased in value from first-half 2006, it decreased from Italy and India.
Plugging in the January-June five-year (we’ll call this the “five-year” from now on, to save space) average rate, the 2007 estimate on granite-import value is $1.56 billion, or a 0.9-percent increase from 2006. Using last year’s rate, however, the estimate drops to $1.49 billion, or 3.4-percent less than 2006.
Total value is an interesting tote-sheet exercise; in actual amounts of granite imports, though, the trends point slightly down. For worked (slab/tile/finished) granite, the first-half 2007 total is 1.16-million metric tons, down from 1.2 metric tons in January-June 2006.
Of the top four countries exporting granite to the United States, both Brazil and India show reduced tonnage in first-half 2007. China’s rate is roughly the same; only Italy shows a gain through an unusually high spike in April-June 2007 imports.
Using the five-year average, the estimate for 2007 worked-granite imports is 2.49 million metric tons, down 5.4 percent from 2006. Using the import rate from last year, the total goes up slightly – 2.55 million metric tons – but that’s still a 3.2-percent drop from last year.

MARBLE
2007 import value: Up
2007 import volume: Up, but how much?
The market’s taking a shine to at least one stone: marble. All the import figures indicate that there’s growth in value and volume.
Unlike granite, where very little material comes into the country “unfinished” – in raw boulder or block – at ports-of-entry, only 55 percent to 60 percent of marble comes in worked form. Since the dimensional-stone trade is fueled by worked stone, estimates are limited to that category.
The import value for worked marble in the first six months of 2007 totaled $151.9 million, up from $126.5 million. Italy remains the king of marble imports, with its $64.4 million in first-half 2007 easily doubling the total of its nearest competitor, Spain ($25.8 million).
Applying the five-year average, the estimate for total 2007 worked-marble import value is $366 million, which would be a 36.9-percent gain from 2006. However, the total value of worked marble last year ($267) dropped 5.5 percent from 2005 totals, which might indicate some softness in current markets.
Using last year’s January-June figures as a guide, the estimate on total 2007 import value drops to $320.9 million. However, that’s still a strong 20-percent gain from all of 2006.
The figures from 2006 make estimating worked-marble import volume a bit tricky. The 137,698 metric tons received stateside in the first six months of 2007 is barely 2,000 metric tons more than for the same period in 2006.
Using the five-year average, the estimated final tonnage of worked marble for 2007 is 295,489 metric tons, up 9.3 percent from 2006. Using the 2006 import rate as a guide, the 2007 estimate drops to 274,353 metric tons, or only a 1.5-percent increase from last year.
A big jump in import value and smaller increases in actual tonnage may look incongruous, but the numbers are really telling another story. A higher value-per-metric-ton means that imported marble prices are going up.

TRAVERTINE
2007 import value: Up, marginally
2007 import volume: Down
While granite lit up the dimensional-stone market in the first years of this century, travertine also made heady gains. Unlike other countries, United States import data tracks travertine separately from marble, giving the stone its due in market share.
The rocket ride for travertine, however, seems to be easing. The $262.5 million in import value for January-June is up from the same period in 2006, but it’s a gain of less than two percent for a stone that previously experienced hikes of 20 percent to 30 percent per year.
Turkey remains the dominant player in U.S. travertine imports, with its $166.6 million accounting for 63.4 percent of the stone’s total value for the first half of 2007. That’s only a 2.5 percent increase in value from January-June 2006, however.
The five-year average reveals an estimated 2007 travertine import value of $570.5 million, a 4.3-percent increase from 2006. Using 2006 as the performance guide, the 2007 import value moves down to $553.8 million, or only 1.2-percent better than last year.
The 443,560 metric tons – with 86.5 percent from Turkey alone – sent to the United States in the first half of 2007 is down from the 474,621 received for the same time in 2006. Turkey increased its exports by 13.5 percent, but other countries reduced the flow of travertine.
Travertine’s estimated import volume, using the five-year average, for 2007 is 950,011 metric tons, down 1.3 percent from 2006. With last year’s imports as a guide, the total estimate drops to 899,537 metric tons, or 6.5-percent less than 2006.

SLATE
2007 import value: Down
The remaining stones tracked with import data are measured in value only. Slate enjoyed a health rise in imports in the past few years, but 2007 shows some slackening.
Import values for slate in January-June this year totaled $56.1 million, down from $59 million for first-half 2006. China and India continue to dominate with more than 80 percent of the total value; China remained on pace this year with first-half imports, but India’s value fell slightly.
Using the five-year average, the estimate 2007 import value for slate would be $125 million, down 4.4 percent from 2006. The estimate model with last year’s trend pegs the import value total at $124.5 million, down 4.8 percent from 2006.

OTHER CALCAREOUS
2007 import value: Up
The stone category that picks up the calcareous stones that aren’t classified as marble or travertine (such as limestone and alabaster) sails its own course in imports; when other categories are up, it’s often down. For 2007, it’s continuing to be contrary.
First-half 2007 import values for other calcareous came to $107.2 million, ending two years of declining numbers. Using the five-year average, import values would be an estimated $217.3 million at the end of 2007, up 5.4 percent from 2006. With last year’s trend providing guidance, the estimate is $216.6 million – still 5-percent better than 2006.

OTHER STONE
2007 import value: Down
As the catchall for the rest of stone imported into the United States, this category often follows the general market trend. This year seems to be no exception.
The import value for other stone from January-June 2007 is $134.5 million, down $8.9 million from the same time in 2006. The five-year average yields a final 2007 estimate $289.2 million, or a 4.8-percent decline from last year. With 2006 as the market guide, the 2007 dips a bit more to $284.7 million, or 6.3-percent behind last year.