In such a complicated scenario, the Italian stone industry has floundered a bit, but overall it has been firm and capable. The trends may be looked at from two different points of view: the industry and the business perspective. The former is better documented, or rather there are very specific times that are known, especially as regards exports and domestic markets, while other areas are definitely more uncertain, upstream production for instance. The latter is far less documented, but a survey we conduct at the start of every year about the results of the closing year is fairly clear. So let’s start with the documented part.
In 2009, Italian stone imports and exports accrued, month after month, a final result that is negative compared with the previous year but which still contains very constructive and potentially expansive factors, even for 2010.
The final balance shows a clear drop, nearly -20% in global value on 2008, which is even more marked if we move on to a two-yearly analysis, i.e. if we compare such figures with those of 2007.
It is not so much quantities as values that suffered the most over the last year, especially some specific entries: exports of raw and semi-finished marble are positive on both sides, and are actually on the rise over the two-year period. This loosely confirms what we found out about the global scenario: generally speaking, marble fared better than granite, appearing to be, as we said, more “resilient” than other types of stone, even if it mostly concerned raw and semi-finished marble. These were in fact the materials that could rely on a more stable and appreciative global market, especially the most widely known or the most established marble varieties from some specific areas, for instance Carrara. But this is a positive note that we would be happy to find in other columns of the Table, as it anyway concerns types of marble that have a lower added value than finished marble, which are therefore less relevant to Italian “manufacturing”. But if we want to really see the positive side of it, there is still the strong prominence of a national industry where the material is still an important, attractive asset, which helps ground production to a local region, despite negative fluctuations. It will be up to Italian producers, well known and in any case experienced, to manage to bring other industry exports back to a “+” sign, even with the awareness that going back on some processes is not so easy and should not be taken for granted. However, if we look at the figures in the previous Table in terms of average value per product unit, the results are a bit different and less negative, even if the “-” signs appear in the first line and for slate as well. The trend of the Euro over the course of the year undoubtedly tired out all European producers, and even the Italians, further increasing the impact of costs, that are still high despite the crisis. Figures are given in Euros and clearly show the trend of the last three years, pointing at the types of products where value was reduced in order to retain the market shares.
From one year to the next we can see processes that are sometimes particularly interesting: as regards finished granite, which is a very important item in terms of average value per ton of exports, or actually the most important item, the process steadily decreased, from 872.6 Euros in 2007 to 860.3 in 2008, to 837.9 in 2009. On the contrary, the trend of raw and finished marble rose in 2008 and then fell in 2009, but never dropped below the level of two years before. The fact that Italian finished granite was forced to face a drop on its priority markets, with competition played on production processes that are still not comparable to European manufacturing industries, is clearly expressed by the figures: competition is increasingly fierce, year after year, and differences in costs may only be made up for by an overall product quality and range that is worth the price difference. It is a possible result but one that is hard to achieve, and anyway targeted at very particular consumer groups that at times of crisis are still active but do not necessarily expand and where however competition from other qualified producers tends to grow. In addition, these markets often have smaller, although more profitable, volumes. Hence in the long term they may involve a feedback on supply that can kick-start a gradual reorganisation of production, which may have an impact on employment as well.
To highlight the different trends of Italian exports of raw and finished products, we can use data clusters that may further highlight such differences.
Figures appear even more distant if we compare them with 2007: this shows even more clearly that these processes have been occurring for some time and in 2009 they were simply the continuation of an earlier process.
It will not be easy to stop such a trend, and maybe it will not be possible to stop it at all, but we are still likely to pay more attention and invest more energy into finished products, if we want to retain, in the future, in “heavy” and stable enough terms, that quality leadership that Italy still holds.
If we want to process again the percentage impact of the two macro-categories, we can add the last Table: the percentage composition of Italian exports over the last three years.
In conclusion, although this trend has had a lesser impact over the last few years, finished products are still the category that accounts for most of the national industry wealth, thus being, once again, the core business on which all efforts should be focussed to support the Italian stone industry. Raw and semi-finished products may have fared well on the markets, resisting competition and finding sometimes unexpected opportunities at times of crisis, yet they failed to make up for the drop in the impact of finished products, in terms of average values as well as in terms of absolute values. The focus of production, exports and domestic business ultimately brings us back here, to the core business of the system: the material plays an irreplaceable role but it is the processing that adds value to the whole industry.
What are the areas for Italian exports in 2009?
The table below, divided into geographical areas, shows some interesting figures, especially if compared with the previous year.
It is fairly clear that the area that most contributed to the negative signs in Italian exports in 2009, along with the European Union, is North America, mainly the United States, that cut its business almost by half over the year and is the destination of our most valuable domestic products, and this comes after a 2008 that had already been remarkably worse than the previous year. As we saw, there are signs of recovery in the USA now, which go hand in hand with signs of continuation of valuable projects, which kept the Italian producers busy in 2009 as well. However, should the North-American market recover significantly in some less valuable product categories, the Italian finished stone products, especially granite, would have fierce competition to face, especially if the Euro remains on the high levels it generally kept all through 2009. For the time being, the average values per ton of exports, in the different geographical macro-areas, were fairly good, all things considered, as summarised by the Table below. That was the result of a dynamic balance between diverging processes: on one hand, prices to defend to be still making a profit, and, on the other hand, market shares to be retained to hold on to a sounder outlook on the future and to foster market loyalty, while waiting for the crisis to end and thus bring international competition back into play as regards different factors.
Whenever we shared the same currency and comparable working standards, that is, across the European Union, there have been no negative changes, and even in the USA the higher value of such goods was substantiated by a higher average value, partly due to the Euro/dollar currency rate. These reasons are presumably the same that supported the value of exports in other areas as well, where after all our exports remained valuable and steadily expanded, or at least this was the case on those markets that somehow kept paying well for our work and our materials.
In terms of volumes and absolute values, Italian stone exports grew against Africa too, especially the Mediterranean region, an area that is becoming increasingly important, not only for this industry, even if volumes firmly outweighed values. Overall, export flows redefined our market shares, as suggested by the Table below.
The European Union is still our greatest partner, supplemented by non-EU Europe. But the weight of the Far East is growing too, with China as the main player, with a basically stable and consistent role in both volumes and values. However, as a “historical” trend, a term that is definitely too strong for such a short period, we can look at what happened over the last four years.
The Table above confirms that every year Africa is moving at a steadily positive pace, just as steady, although negative, as that of the United States and the European Union: the crisis hit the Western countries, in particular, and in such countries competition from the emerging producer countries is fierce and increasing. North Africa however deserves a more detailed table, providing more information on Italian imports in the last two years, in volumes and values.
Only finished marble and travertine (in our statistics they are always shown together, as they cannot be separated at the source) experienced a reduction, more in volume than in value. The drop in volumes had already occurred in 2008 on 2007, so it was confirmed and amplified. Algeria, Tunisia and Libya were particularly positive, while Egypt was an excellent partner for finished marble.
Now, imports deserve some reflections. These mainly concern stone materials and reflect the overall industry trend in Italy: an all-negative Table, compared with 2008, and even very heavily: with generally consistent volumes and values, the statistics show a decrease of 30%, if not more, mainly due to raw granite, but also marble, although to a lesser extent.
If we compare these figures with 2007, the decrease looks even worse since it confirms an ongoing, remarkable trend, especially for siliceous stones that the Italian industry processed and re-exported less than before.
Imports of finished products from abroad also stopped, as was, after all, to be expected: it was a comparatively recent phenomenon and, with such overproduction as regards the domestic industry, the demand for imports slowed down accordingly. The geographical distribution of exporters tells us which regions and which countries continued mostly trading with Italy.
Speaking of the most important partner countries, the heaviest decline is that of the Far Eastern countries, mainly India, but also some other regions and countries such as, above all, Brazil, or even the Scandinavian countries and Spain, and then South Africa and other African countries from which we had recently started to buy materials, such as Mozambique and Angola.
All things considered, the Italian stone industry suffered in 2009, and our surveys of the first few months of the year confirm that the stone production system as a whole hit a very bad patch. There is now cause for greater optimism for the future, but certainly the news that comes from the general economic system, in particular from the European economies, does not help. Now, moving on to considering the Italian stone industry from a business perspective, we should say that many times in the past we have found a substantially different attitude in relating to the immediate future. Companies have two different ways of looking at what is going to happen in the short term: the overall view of the industry and the widest scenario in which the industry has its place are on one side, and the more strictly corporate view, the one that relies more on direct experience and on the ability and willingness to retain market shares and keep on working is on the other side, on different terms. The latter view is generally more positive and even this year we had confirmation of that. Although pessimism was rife and widespread, it became lighter when they looked at their own resources.
Unlike in the past, however, in our yearly survey of stone and allied industries, we asked them some specific questions on the crisis, asking them to rate the direct impact it had on their business and what productive and competitive factors they relied on to get out of the crisis. The answers were heated and interesting: the impact has been heavy, especially if we consider that this is an industry where the average size of the businesses is a small, which means they have comparatively low resources. It was no surprise, then, that the overwhelming reply was that the crisis has been definitely heavier than what had been seen in other crises before. Often though such opinion was supported by a positive judgement of their own survival skills, especially from the processing companies, which are those that have been hit hardest by the recession in 2009: there has definitely been an impact but they think they can get over it or that they have already got over it. The answer on the strategies they mean to rely on for the future and to build their recovery on was equally clear: the stone companies have deeply focussed and intend to keep focussing on business factors, mainly by cutting down on variable costs (organisation, hiving off ….) rather than on fixed costs, which they had already cut down whenever they could (first and foremost, jobs), and innovation and research. As to the strengths they could rely on, they mentioned product competitiveness and product diversification as well as a deep focus on corporate finance (liquidity, payables and receivables..), and little, very little, importance attached to price competition. They generally do not think they can cut down on anything else without endangering their companies’ solidity, and after all the asymmetry with some competitors would rule out any general strategy on such a factor. Surprisingly, though, they do not pay too much attention to business and marketing campaigns, which they must consider to be already at a level that cannot be changed any further. Overall, the industry proves to have a well-reasoned, realistic view of the situation and to be willing to move with caution and confidence, at the same time, without denying that the overall situation is extremely difficult to understand and handle. These assumptions are very promising for the Italian stone industry as they show that, beyond the problems and the objective general decline of the business, there is still a will to be there, and this is what will give structure to the recovery strategies.
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