Written by Manuel Alcocer Álvarez
The pandemic and the war in Ukraine have undoubtedly been two factors that have considerably harmed the Spanish tile sector. Some of the consequences have been production stoppages, transport blockades, price increases and demand exceeding supply.
The Spanish ceramic tile and flooring sector is the fifth largest producer worldwide, the second largest exporter by volume and the third largest exporter by value. Its impact on the Spanish economy in 2021 was approximately 3,800 M €, equivalent to 2.7% of Spanish industrial GDP and 0.34% of total Spanish GDP. On the other hand, the United States is the world's largest importer of ceramic products, especially tile.
To understand the importance of the relationship between the United States and Spain with respect to the tile industry, we must highlight the following: Spain is in second place, behind Italy, in terms of the value of tile imports into the US, accounting for USD 371.04 M in 2020 and having risen to USD 483.05 M in 2021. This means that Spain has a 24.3% market share in value in the US market, which is getting closer and closer to Italy's leadership, with 32.4%.
This was stated by the Economic and Commercial Office of the Spanish Embassy in Miami, in a report on tile in the United States published in March 2022.
However, Spain is the leader in terms of volume to tile imports to the U.S. In 2020, Spain exported 37'55 M m2 and in 2021 the exported volume increased to 46.04 M m2 in 2021. The difference is in the price: the highest price of ceramic tile is Italian setting at 17.86 USD in 2021. It is followed by Spain, with a price of 10.49 USD in the same year and 9.88 USD in the previous year, being the country that has increased its price per unit the most between 2020 and 2021.
These data highlight a great resilience in the ceramic industry, despite the consequences suffered by COVID-19.It is true that the pandemic brought down the construction sector in the first months of 2020 and posed major problems for exports such as delays in shipments, logistical obstacles and raw material shortages. This has caused international shipping rates to increase by 229% between August 2020 and August 2021. However, the sanitary crisis has awakened opportunities: after consumers placed greater value on hygiene, they gained awareness of the sanitary advantages that tile has, such as its ease of cleaning, resistance and low level of water absorption.
On the other hand, new problems and uncertainties have appeared for exporters of ceramic products during 2022. The war in Ukraine has increased gas and electricity prices, severely affecting the electro-intensive materials production industry, including tile production. This leaves reduced margins for SME exporters in this sector, many being forced to raise selling prices, which may affect their competitiveness and viability in the medium term.
The reduction of production and even the closure of kilns have been two of the measures that some manufacturers of ceramic products have had to take. According to the Industrial Production Index, there has been a decrease in the monthly variation of 25.7% in January 2022 with respect to the same month of the previous year.
Another noteworthy aspect is the dependence of Spanish ceramics on imports of kaolin and clays from Ukraine, unlike Italy, its major competitor. More than 70% of these materials come from the Donbass area and, according to the Spanish Association of Ceramic Tile Manufacturers (ASCER), they are essential for production in this industry. The trade blockade forces exporters to look for other suppliers, such as the USA, Brazil, Germany or the UK, buying at higher prices as a result.
Fernando Sánchez-Rey, an independent consultant in electricity pricing and billing, gave us a more detailed account of the situation and possible solutions that may be of interest to exporters in the ceramics industry:
Q: The European Commission proposes to reduce global energy demand and provide financial compensation. Do you see this as an effective solution for exporting SMEs?
A: It could be done through interruptibility, a solution that was used in the past and it would be interesting to recover. It consists of a temporary stoppage of production in order to balance demand with energy generation, in exchange for an economic compensation that would definitely help SMEs to resist.
Q: With gas prices so high, is there any possibility of cost savings without slowing the rate of production in the factories?
A: There is a way and that is that the government intends to incorporate a cap on gas including cogeneration. Let's remember that cogeneration is a process by which thermal and electrical energy is generated simultaneously, being able to sell the latter to the grid and be more efficient. This is a solution that could be especially useful for ceramics.
Q: In your opinion, what could be the situation of the ceramic industry this winter and its exports to other countries?
A: We cannot know exactly what will happen because we depend to a large extent on the evolution of the war, relations with Algeria and other geopolitical factors. However, I believe it is key to invest in and research energy storage with large batteries and the use of hydrogen, which can also generate thermal energy, which is essential in the ceramics industry.