It is always difficult to interpret national and international events in the technology sector. Attempts to classify and analyse statistics are hindered because machinery products move from one country to another as goods produced in one area and then sold, placed and used in another. Moreover, they are often shipped in different lots and are therefore confused with other mechanical and automatic parts destined for other uses and industries. This is because basic engineering technology is the same for various uses and industries and often innovation comes from other production and research circuits which is then adapted to the industry. Much technology, often sophisticated, is actually conceived in the stone industry and then mixed with other parallel industries. Yet there is also technology from other industries which is imported and adjusted to meet the industry requirements. Hence, it is hard to separate what is specifically imported and exported for the stone industry from the rest and this difficulty remains even though ceramics have now managed to achieve a separate classification for their uses. Furthermore, as recalled in previous years, it is not possible to monitor the engineering for quarrying or quarry handling machinery which account for interesting figures in terms of both value and volume. Only a few industry associations in Italy and abroad collect this specific information and distribute their direct findings.

The official data for the Italian industry for cutting and processing technology (first and second level) for natural stone point to a generally positive year in 2006, although not evenly distributed amongst the various trade partnership areas. Our data, as can be seen from our tables, only takes into account items which can be attributed exclusively and definitely to stone industry technology and excludes anything which may have more varied uses or customs classification items which mix them with other industries. Hence the turnover figures are lower than the total that they really represent but they are “sure”, especially when it comes to the fluctuations and variations which emerge from the comparisons with other years for the various geographical areas.

So the year 2006 was all in all a positive one, recording a small percentage rise on the previous year. This is not a superb result but it is solid and is concentrated on the more sophisticated machinery for second level processing and machine tools for which the Italian industry is particularly qualified. The latter two categories also recorded increases in the average values which confirm that the Italian industry has maintained its position of supplier of highly advanced quality technology in the world. Close proximity with the national processing industry has obviously enhanced the possibility to experiment and develop production for its leading customers, i.e. those in the Italian stone industry who are well known for their high quality standard requirements. The fast growth, however, concerning the stone industry throughout the world over the last decade has brought about certain changes. For example, the time for innovation to be transferred to foreign competitors has shortened (which also applies to distant competitors) as too has the actual lead time in the production of technology. What we are now seeing is the sale of new technology not only and sometimes not first to Italian users but rather to foreign processors and users with all the consequences in the industry over time. In addition to the shorter innovation transfer times, there is a growing tendency for other countries to produce their own machinery and subsidiary products. Moreover, even in the machinery sector there are new competitors who are acting totally independently on the international markets with no inferiority complexes. National industries such as those in China and India are now competing against the Italian industry and their close working ties with the local stone industries will help them to build trade circuits which in time will allow them to carry out their own experimentation. At present these are consumers who use non-automated technology too but they stand alongside those who use more advanced technology for whom the Italian mechanical and subsidiary industry is no longer the leading supplier. The Italian share of the market has consequently suffered and only the overall growth of the stone industry makes it possible to see the figures for national machinery exports to the rest of the world in a positive light.

Now let’s look more in depth at the figures showing the trends for Italian exports of primary and secondary cutting and finishing machinery and tool machines. Let’s take the value data in euros since they are the most significant.

So slight growth again can be seen on an international level which proves the presence of the Italian machinery industry everywhere where there is a national processing stone industry. There are some points to be made however, Firstly, tool machines account for by far the largest share of exports and are increasing in all the important geographical areas. Exports are also increasing in the Far East. Here they serve to integrate the local production of technology which is less advanced, thereby confirming what is said above as regards the gradual shortening of the time for the circulation of advanced technology. India is the major buyer overall for this technology, followed at a distance by China and Indonesia and all three are growing significantly. The Middle East, on the other hand, seems saturated at the moment and is experiencing a slowdown and consequently recorded limited figures. The major market for Italian tool machinery remains the European Union. This too recorded an increase on last year even though it was not able to match the 2004 figures. Spain was the most important customer, followed by the UK, then Portugal, France and Belgium. North America was also important, as it has been for some time, while in Europe the major markets outside the EU were Russia and Turkey, yet both fell against 2005 figures.

As always, the relationships between the various items on the previous table provide the key to understanding how the various countries shift their focus in the various cycles and what the local intentions are depending on whether the cycles need strengthening or are sufficiently equipped. Cutting machinery, especially for primary cuts, represents the first phase of the cycle and industrialisation, and is the first to start growing again when the stone industry and consumption are in a phase of expansion. The 2006 figures practically record an annual increase compared to 2005 only in Europe, inside and outside the EU, which altogether accounts for almost half the markets. Spain again was the major market, followed by France, Greece and a new, up-and-coming Poland, and Turkey which was still expanding and only the US exceeded. On the other hand, Brazil and Iran declined while India equalled Turkey.

As regards finishing machinery, the picture is a little more complicated. In the European Union which is the major market, Germany set itself alongside Spain yet its positive role was somewhat inferior. The major buyer was the United States which is still growing and regaining its 2005 position while this is practically the only item where North Africa showed signs of growth on the previous year. Within North Africa, and in terms of the other items, the figures differ according to the individual countries and only Tunisia recorded increases for practically all items compared to 2005, yet only in a limited way.

Hence, the overall picture is fairly simple, generally positive and quite clear. Tool machinery technology held the highest market shares and the most important areas were the closest areas and those more traditionally served by Italian producers, with a few particularly trusting markets and some shy newcomers.

At present, there do not seem to be any new particularly “revolutionary” products in terms of production or management. Research is certainly active though and new ideas are welcomed by machinery production companies which have to deal with new markets and new producers. For the time being the most interesting innovation concerns monitoring the safety of quarry fronts. This is more the domain of institutions rather than private enterprises even though the latter support such initiatives and are highly concerned by the matter. The use of certain forms of electronic and computer automation is already normal procedure in the stone industry and innovation is more to do with improvement and optimisation rather than radical changes. In other words, for the time being there do not seem to be the premises for innovation comparable to what has already been introduced such as the use of automatic controls for the mixing and dosage of the cutting mixture in granite sawing or the diamond in the cutting of limestones which was introduced some decades ago now. Of course this does not mean that the industry is at a standstill and that there are no developments, even very effective ones, in the field of technology. It merely indicates that development is fairly linear and continuous without any sudden leaps in quality.

It is always difficult to interpret national and international events in the technology sector. Attempts to classify and analyse statistics are hindered because machinery products move from one country to another as goods produced in one area and then sold, placed and used in another. Moreover, they are often shipped in different lots and are therefore confused with other mechanical and automatic parts destined for other uses and industries. This is because basic engineering technology is the same for various uses and industries and often innovation comes from other production and research circuits which is then adapted to the industry. Much technology, often sophisticated, is actually conceived in the stone industry and then mixed with other parallel industries. Yet there is also technology from other industries which is imported and adjusted to meet the industry requirements. Hence, it is hard to separate what is specifically imported and exported for the stone industry from the rest and this difficulty remains even though ceramics have now managed to achieve a separate classification for their uses. Furthermore, as recalled in previous years, it is not possible to monitor the engineering for quarrying or quarry handling machinery which account for interesting figures in terms of both value and volume. Only a few industry associations in Italy and abroad collect this specific information and distribute their direct findings.

The official data for the Italian industry for cutting and processing technology (first and second level) for natural stone point to a generally positive year in 2006, although not evenly distributed amongst the various trade partnership areas. Our data, as can be seen from our tables, only takes into account items which can be attributed exclusively and definitely to stone industry technology and excludes anything which may have more varied uses or customs classification items which mix them with other industries. Hence the turnover figures are lower than the total that they really represent but they are “sure”, especially when it comes to the fluctuations and variations which emerge from the comparisons with other years for the various geographical areas.

So the year 2006 was all in all a positive one, recording a small percentage rise on the previous year. This is not a superb result but it is solid and is concentrated on the more sophisticated machinery for second level processing and machine tools for which the Italian industry is particularly qualified. The latter two categories also recorded increases in the average values which confirm that the Italian industry has maintained its position of supplier of highly advanced quality technology in the world. Close proximity with the national processing industry has obviously enhanced the possibility to experiment and develop production for its leading customers, i.e. those in the Italian stone industry who are well known for their high quality standard requirements. The fast growth, however, concerning the stone industry throughout the world over the last decade has brought about certain changes. For example, the time for innovation to be transferred to foreign competitors has shortened (which also applies to distant competitors) as too has the actual lead time in the production of technology. What we are now seeing is the sale of new technology not only and sometimes not first to Italian users but rather to foreign processors and users with all the consequences in the industry over time. In addition to the shorter innovation transfer times, there is a growing tendency for other countries to produce their own machinery and subsidiary products. Moreover, even in the machinery sector there are new competitors who are acting totally independently on the international markets with no inferiority complexes. National industries such as those in China and India are now competing against the Italian industry and their close working ties with the local stone industries will help them to build trade circuits which in time will allow them to carry out their own experimentation. At present these are consumers who use non-automated technology too but they stand alongside those who use more advanced technology for whom the Italian mechanical and subsidiary industry is no longer the leading supplier. The Italian share of the market has consequently suffered and only the overall growth of the stone industry makes it possible to see the figures for national machinery exports to the rest of the world in a positive light.

Now let’s look more in depth at the figures showing the trends for Italian exports of primary and secondary cutting and finishing machinery and tool machines. Let’s take the value data in euros since they are the most significant.

So slight growth again can be seen on an international level which proves the presence of the Italian machinery industry everywhere where there is a national processing stone industry. There are some points to be made however, Firstly, tool machines account for by far the largest share of exports and are increasing in all the important geographical areas. Exports are also increasing in the Far East. Here they serve to integrate the local production of technology which is less advanced, thereby confirming what is said above as regards the gradual shortening of the time for the circulation of advanced technology. India is the major buyer overall for this technology, followed at a distance by China and Indonesia and all three are growing significantly. The Middle East, on the other hand, seems saturated at the moment and is experiencing a slowdown and consequently recorded limited figures. The major market for Italian tool machinery remains the European Union. This too recorded an increase on last year even though it was not able to match the 2004 figures. Spain was the most important customer, followed by the UK, then Portugal, France and Belgium. North America was also important, as it has been for some time, while in Europe the major markets outside the EU were Russia and Turkey, yet both fell against 2005 figures.

As always, the relationships between the various items on the previous table provide the key to understanding how the various countries shift their focus in the various cycles and what the local intentions are depending on whether the cycles need strengthening or are sufficiently equipped. Cutting machinery, especially for primary cuts, represents the first phase of the cycle and industrialisation, and is the first to start growing again when the stone industry and consumption are in a phase of expansion. The 2006 figures practically record an annual increase compared to 2005 only in Europe, inside and outside the EU, which altogether accounts for almost half the markets. Spain again was the major market, followed by France, Greece and a new, up-and-coming Poland, and Turkey which was still expanding and only the US exceeded. On the other hand, Brazil and Iran declined while India equalled Turkey.

As regards finishing machinery, the picture is a little more complicated. In the European Union which is the major market, Germany set itself alongside Spain yet its positive role was somewhat inferior. The major buyer was the United States which is still growing and regaining its 2005 position while this is practically the only item where North Africa showed signs of growth on the previous year. Within North Africa, and in terms of the other items, the figures differ according to the individual countries and only Tunisia recorded increases for practically all items compared to 2005, yet only in a limited way.

Hence, the overall picture is fairly simple, generally positive and quite clear. Tool machinery technology held the highest market shares and the most important areas were the closest areas and those more traditionally served by Italian producers, with a few particularly trusting markets and some shy newcomers.

At present, there do not seem to be any new particularly “revolutionary” products in terms of production or management. Research is certainly active though and new ideas are welcomed by machinery production companies which have to deal with new markets and new producers. For the time being the most interesting innovation concerns monitoring the safety of quarry fronts. This is more the domain of institutions rather than private enterprises even though the latter support such initiatives and are highly concerned by the matter. The use of certain forms of electronic and computer automation is already normal procedure in the stone industry and innovation is more to do with improvement and optimisation rather than radical changes. In other words, for the time being there do not seem to be the premises for innovation comparable to what has already been introduced such as the use of automatic controls for the mixing and dosage of the cutting mixture in granite sawing or the diamond in the cutting of limestones which was introduced some decades ago now. Of course this does not mean that the industry is at a standstill and that there are no developments, even very effective ones, in the field of technology. It merely indicates that development is fairly linear and continuous without any sudden leaps in quality.

What were the changes in 2006 in the stone industry? There is always some change or innovation even in an industry like ours which is not strategic on an international level yet is strategic for the economic development of some countries and anyway moves goods, money and work almost everywhere in the world.

1. We have seen that global production continued to rise in 2006, albeit more slowly and here we witness the first new trends compared to those we had been used to over recent years. The large Asian producer, China, that is responsible for the major changes in the industry on an international scale, actually slowed down its own quarry production, preferring to integrate this with raw materials purchased in other countries where it continues its “buying campaign”. Its leading supplier of raw marble and slabs was Turkey, followed by Egypt, while its major granite supplier was India, followed far behind by Brazil. The figures are large and are due to the fast development of the domestic building industry. This has been so fast that it has even generated reasonable apprehension among international investors. The economic development of the country is obviously creating a series of mechanisms which are involving the stone industry too. The first consequence for the industry is that foreign supplies have become even more important on a local level since they represent a substantial additional supply of quality materials which is also necessary for development of the domestic industry. The second is that India that has continued to develop and grow in the industry has become the leading overall producer of natural stone, with its production of marble, sandstone and other stones as well as granite. Table A in the Statistics Appendix features marble and granite only since the figures available for sandstone and other local stones are too chaotic in too many countries to be compared coherently in terms of international production (which we always try to keep as clear as possible despite the numerous difficulties). If we consider these items too there is no doubt that India is the new leader in the industry both in terms of raw material production for foreign markets and in terms of production in general. This is also because the country is experiencing a period of great economic expansion in general and consequently so too is the stone industry. It should also be remembered that India is also very much at the fore of the technology sector too, as is shown by the data concerning trade amongst areas for primary and secondary processing machinery. Italian exports to the area did not actually feel the competition from India very much as far as certain types of products important to Italy are concerned but there is definitely a bracket of local buyers who are well covered by Indian products and are therefore outside the circuit of Italian products, on the second level too.
   
   
2. Investments abroad aimed at decentralising production, according to a development model which copies the growth in other countries like Italy, increased in 2006 and are bringing the stone industry nearer to other industries which are in lighter production categories. This is the answer to external challenges, mostly in terms of costs, which our industry is experimenting too by making its product mix and strategies more complex, more international and, at least for now, more efficient. We have already seen the risks which are anyway embedded in the process of company internationalisation that is the further shortening of innovation transfer times from national to foreign industries. It is of course an inevitable risk for all producers at the fore of processes and a consequence of the speed of information, experience and technology. Other production industries are experiencing radical reorganisation in terms of the international division of jobs, skills and roles on the international markets. We are living in a time of great changes triggered off by political and technological developments. All we can do is to deal with the changes step by step, trying to understand and learn as much as possible from others and to absorb and manage everything that is new and useful and to invent. The fusion of global and local environments does cause problems but also creates cues and solutions which may become very stimulating and positive. This can be seen in the statistics of an “old” country like Italy: its skills and ability to maintain a solid position in the high end products segment have worked well with the new inputs and production models generated by globalisation. Moreover, the possibility of internationalising at least a small share of its product mix has enabled the country to stand firm as the leader in terms of quality in consumer markets like Germany and the United States which are not only prestigious but also very profitable. We have seen the average unit price of exports from various suppliers. The process requires very high production efficiency standards which do not always bring sufficient profit margins. Further, even without excluding new, less sophisticated products (more “common” products but quality products in certain aspects) this is increasingly becoming the role and the position of our country and other similar ones on the international markets.
   
   
3. Hence an increasing number of countries have positioned themselves in a fairly complex and creative way thanks to experiences which are new to the stone industry in market segments which are increasingly less price-sensitive. Price is in fact very clearly a factor that does not create comparison or competition among many international producers. In the more traditional countries such as Italy and Spain, innovation in the stone industry has developed in an alternative and complementary way, not just purely in the managerial and technological sense of cost reduction, production optimisation etc., even though these issues obviously get much attention. It should be emphasised that there is an explicit ambivalence in terms of managerial optimisation: it is well known that this is not a competitive strength for many classes of producers, yet apart from being a useful aim it is also a necessary one to be achieved and constantly updated. Hence companies are aware that general optimisation including cost reduction and production innovation is a value in itself as it brings product innovation and is a way of improving a company’s and an industry’s positioning and overall efficiency. However, this does not provide a competitive advantage for countries whose basic cost levels are those of European countries. The latter and others in the same position will have to combine their presence capacity with other less material factors which are less immediate and probably more risky yet hopefully efficient to maintain their advantage on the international markets. The risk is still high because the vertical differentiation of market segments is increasingly quicker as seen in the technology data: the fast, overall growth of India in all areas of the stone industry and subsidiary sectors clearly indicates that India will soon be the main competitor even for China in the fundamental finished products segment.
   
   
4. The best markets and the upper market segments in general, need special attention to be suitably defended from competitors outside the stone industry too. Careful planning in this sense will lead to stabilisation of demand over time and in terms of quality which in turn leads to a better, more organised supply as it allows companies to achieve better planning of production and, ultimately, higher profitability. The whole industry benefits and in particular the districts where the companies able to move in this direction operate (since the effects do not remain within the confines of the individual companies or even the local area but even other districts). This is the role of the big players mentioned above who drive the geographical area and industry sector in which they operate. In general, this role is attributed because of technological or managerial innovation but it actually applies to marketing and the general enhancement of products or materials too. In our industry particularly clever companies or areas specialised in a unique product have been successful in this way. We might recall for example the market for skyscraper cladding in granite which was a market opened up by the Italians, or rather a handful of Italian companies and subsequently followed by others. In 2006 too, although they may not have achieved the same level of innovation as mentioned, certain companies did successfully focus on consolidating and stabilising trade relations and supply segments with a view to making demand less fluctuating. They achieved success on different routes but their common strong point was undoubtedly their reliance on their distinguishing features so as not to be lost in the sea of producers.
5. But how did they manage to distinguish themselves and maintain an advantageous and recognisable unique profile on such a varied, crowded market of producers and consumers? One of the possible answers is concentration on the distinctive features of a place for example, i.e. reliance on some element which cannot easily be reproduced or taken away by competitors. In a world where acquiring innovation is increasingly faster thanks to more and more efficient and faster and faster communication networks, there is also the other side of the coin which involves turning everything outside globalisation to one’s own advantage as a unique competitive element. The inability to copy goods has become a distinctive competitive element which may also be a decisive winning element. Let’s think about a name which has the power to evoke a wealth of values, memories and other elements from which there emerges a positive connotation which is immediately recognisable: the Roman travertine of the Colosseum, Assuan Red, Carrara white, the Taj Mahal white, Black Africa and so on. These names alone are a guarantee and attraction for upper market consumers and draw other materials and products which are not as attractive but maybe technically more suitable for more difficult or special uses. Concentration on distinctive features is a possible solution, for example, to face competitors from outside the world of natural stone. Such competitors are very strong and contribute to the complex situation facing the industry as they often take the names of stones to exploit their image. Even within the industry itself, a unique product can be exploited to distinguish a district, area, company in order to inspire its use through clever management, while taking care not to harm the symbolic heritage behind it. The tools to carry out careful marketing of such a precious product are available and in many cases experience is even consolidated. The important thing is to be aware that dealing with a product of shared value means that it has to be managed accordingly in order to protect it for present and future generations.