Thick tile is taking more and more market share of natural stones in China. In the recent two years, ceramic players in Fujian production region have made a considerable profit from thick tiles, and Fujian has become a leading production and sales area of thick tiles in China.
However, as increasing enterprises entered the thick tile industry and the high water absorption product with cheaper price are emerging, the price competition of thick tiles has become fiercer and fiercer. In the past years, Fujian production region was strong at manufacturing glazed porcelain tiles, thin tiles, wood tiles, and medium-thick tiles, however, the competitiveness of these products has been gradually weakened as the price war happened. Therefore, the manufacturers worried that the same may happen to thick tiles.
Whether the price of thick tiles can be stable depends on the number of thick tile production lines in Fujian. According to the investigation of CTW, from now to 2021, the number of enterprises in Fujian which enter the thick tile industry is very limited. Therefore, it is expected that in 2021, the thick tile industry will maintain a basically stable situation in production and price.
1.Most enterprises do not have project sales channels
As we all know, thick tiles are mostly used in real estate and public projects such as parks,gardens, train stations, etc. However, a vast majority of ceramic manufacturers in Fujian are selling their products through wholesale, OEM, export, and distributor channels, while projects are not a common channel.
It is not only difficult for enterprises without project channel resources to switch from wholesale, OEM, and distributor channels, but also some enterprises cannot afford the risk of switching sales channels, which may result in a great cost but not getting any profits in return for quite a long time.
2.It takes time for thick tile to occupy market share of natural stone
Since last year, the sales of thick tiles has increased dramatically, which made a large number of enterprises switching their production lines to produce thick tiles. According to the latest data, there are more than 40 thick tile production lines in Fujian production region.
Thick tiles are good alternatives of natural stones in some application areas, but they are mostly installed on the floor in public constructions, which means the market of this kind of product is limited. Besides, it will take some time for thick tile to be the alternative of natural stone, the enterprises that are thinking to join in the thick tile industry will think carefully before they take actions.
3.The market of glazed porcelain tiles recoverd, making it difficult for ceramic enterprises to decide whether to enter the thick tile industry
The number of ceramic tile production lines is limited in Fujian. In 2020, the market of glazed porcelain tiles recovered and the market demand went up, which brought considerable profits to the manufacturers. Given the good sales of the product, it’s difficult for ceramic enterprises to make a decision on whether to start the production of thick tile. If the manufacturers enter the thick tile industry, they have to revamp one of their production lines, which will affect the output and sales of glazed porcelain tiles. What’s more, it’s too hard for them to afford if thick tiles are unmarketable.
4.The profit of thick tile is contracting, attracting fewer and fewer enterprises to enter the industry
Generally speaking, when we enter a new industry, the lower the product price is, the greater our competitive advantage is. It seems quite right, but actually, profits are too hard to support the price falling too fast, which place a heavy burden on the manufacturers.
The price of thick tiles fell to a minimum of about 50 yuan/㎡ (about 7.57 USD) in April, a 40% decrease compared with two years ago. The price falls too fast with little profits, which make no rooms for latecomers to oppupy the market by lower price. Unless there is a great improvement in technology, which may bring the production cost fall dramatically, it won’t be a wise choice to enter the thick tile industry.
5.The market of thick tiles is limited and difficult to expand
Thick tiles, as its name suggests, are thick and heavy, which result in a higher transportation cost than that of regular products and a limited market. At present, since there are few manufacturers in other production regions producing thick tiles, therefore, thick tiles produced by Fujian enterprises can be sold all around China. Even though a large number of Fujian enterprises start producing thick tiles, the market will not collapse over a period of time.
In conclusion, the above factors prove that the production of thick tile will not increase, which means the price of it will remain stable in 2021. There is no doubt that some wall tile manufacturers in Fujian which suffer a downturn in business may revamp their production lines to produce thick tiles, but this brief shock won't be enough to shake the stability of the overall picture.
(Xu Dahua, Journalist of CTW in Fujian production region)
This is the 408th issue.