Stone Distribution: Anything But Predictable

   Wondering about prices? Well, distributors can see the price of materials going up …  unless it goes down.
   What about the growing demand in China for natural stone? It should have no impact, except for challenging some distributors to keep some stones in stock.
   As for the stone itself, commodity-priced varieties such as Uba Tuba and Baltic Brown remain popular, but so do the more exclusive colors. As for what’s gaining in popularity, well, onyx is also mentioned, as well as marble – except by those who describe marble as an also-ran.
   And, while it remains unclear whether or not more fabricators are doing their own importing, it’s most likely those commodity colors when you see container loads heading to shops.
   The real bottom line: with no clear-cut trends, it’s important to know your own market and the needs of your own business. You might even start a trend or two of your own.
  
PLETHORA OF PRICES
   A simple question about pricing in the coming months points out the fact that the stone market is huge, and not all factors apply to every material in every situation.
   Certainly there are some givens that are driving up costs, according to Scott Primmer of Cedar Grove, N.J.-based Dente Trading Co. Inc.
   “Whether it’s inland freight costs or shipping costs, transportation costs of all sorts, or the cost of security and getting product through a port –  those are all going up,” he says. “However, that figure isn’t up substantially.”
   Nor is the price of those commodity colors. However, that can’t always be said about the less-common colors and those where quarry capacity may be limited.
   “With respect to the exclusive or high-end products, I think that pricing is going to stay strong,” says Joe Dwyer, president of the Farmington Hills, Mich.-based Dwyer Marble and Stone. “There’s no easy way to produce difficult or fragile materials; they simply cost more. Likewise, there’s still an audience who appreciates and wants those items.”
   Jeff Matthews, an Atlanta-based consultant who buys stone worldwide through his company, Trade International, says he’s not convinced the price will go up even for more-exclusive stones.
   He says the decline in the housing market in this country may cause some distributors to rethink their stocking patterns, and suppliers in countries such as Brazil will have to respond by dropping their own prices.
   “How many Juperanas are there in Brazil?” he says. “They’re all slightly different, but how many yellows will a distributor carry, and how many greens are selling and how many greens are they going to buy?
   “I think the Brazilians are seeing a fall off in the amount of purchase power their customers are going to have, and that’s going to cause prices to come down, and it’s going to cause some of the suppliers to go out of business.”
   Both Matthews and Kevin Murphy, a Kentfield, Calif.-based consultant with K.J. Murphy and Co. Inc., say that often the price of stone from Brazil or China, or even at a lot of design centers in this country, bears little relationship to real cost, especially with stones in heavy demand.
   “Certainly some design centers are pricing according to their view of what the customers choose,” says Murphy. “They watch what the customers are choosing and they push the prices up on the things that are very popular, because they can make more money selling Uba Tuba at $11 a square foot than at $7 a square foot.”
  
CHINA SYNDROME
   China, Brazil, and even India aren’t just countries on a map that happen to produce natural stone. As countries with their own governments and their own economies, they play their own roles in the market. But, just how much decisions made thousands of miles away actually impact the U.S. market is open to interpretation.
   For instance, Brazil’s intention to stop exporting blocks in favor of doing more of the value-added work internally isn’t putting a dent in what’s coming to the United States. There’s some feeling it’s a short-sighted move.
   “I remember when Indonesia banned the export of raw logs to Japan and forced factories to set up in Indonesia,” says Murphy. “We didn’t see any impact on costs. It’s just a matter of where the profit gets made.”
   Kurt Swenson, president of Barre, Vt.-based Rock of Ages Corp., observes that India tried to take the same approach many years ago but found it was inhibiting sales of their stone to China.
   “I suspect the major country that will get hammered by the Brazilian decision – if it really holds up as a policy – is Italy,” says Swenson. “They’ve had the historic ties with Brazil and sold and processed Brazilian blocks for many years.”
   Nor is the market’s 500-lbs. gorilla – China – having a huge impact on the availability of stone, despite its growing internal consumption.
   For one thing, the tastes of the Chinese market are considerably different than what U.S. buyers are looking for, say several people, including Dente’s Primmer and Dan Rea, senior vice president-commercial sales and marketing for Cold Spring, Minn.-based Cold Spring Granite Co.
   Primmer describes the preferred Chinese palette as “Old World,” while Rea says that company’s consumption tends toward the lighter pastel shades it quarries itself.
   “Right now, our slab market is more toward the vibrant colors you see in India and South American and even Canada,” Rea says.
   As weak as the economy has been in some parts of this country, experts are also thinking that the Chinese economy will have to – at some point – take a breather.
   Of course, the demand from China is still there, and both Trade International’s Matthews and Kent Schweiss, vice president of sales and marketing for Scottsdale, Ariz.-based travertine supplier World Wide Stone Corp., have projects going on there right now.
   “It was just instantaneous,” says Schweiss. “They said, ‘Here are the quantities we need; can you service us?’ It won’t affect our American market because we were prepared for it, but it’s a part of the market we weren’t involved in two or three years ago.”
   However, some suppliers do see the Chinese demand for stone having an impact on buyers at home. Dwyer Marble’s Dwyer says the impact is in both availability and pricing of some materials, especially higher-quality selections.
   “As demand for these materials goes up, increased pricing will accompany demand,” he says. “Additionally, supply of these materials can become more difficult for periods of time during peak demand. Crema Marfil would be a great example of a commodity stone that’s being affected this way.”
   Melanie Antunes of Atlanta-based AGM Imports says for her it becomes a matter of scheduling as the Chinese show up – cash in hand – to buy blocks her company has traditionally purchased from Italy.
   “In the past, we might wait 30 days for an order of materials from Finland,” she says. “Now, sometimes we’re waiting 60-90 days for blocks to become available. We used to order within a certain time frame. Now, we’re ordering earlier, or we run out of stock.”
  
SAVVY BUYERS
   So, are more fabricators stepping into the import business themselves to secure their own stone and cut out the middleman? Probably not, although some are probably finding it pays with some products.
   Murphy says from seminars he’s presented for MIA (the Marble Institute of America), he feels no more than five percent of fabricators are now doing their own importing, or plan to take that route in the near future.
   “I was surprised,” he says. “I expected the figure to be close to 85 percent. I think the temptation remains strong, but I think most people who want to import want to go with the basics like Baltic Brown, Tropic Brown, and New Venetian Gold.”
   While those are the colors most likely to sell, Murphy says he suspects many who have made the plunge have found they aren’t doing the volume to get the quality and service suppliers reserve for those more important to their own bottom lines. And, where demand outstrips production, they may also get an inferior grade of stone.
   Dente’s Primmer believes that many fabricators who were doing their own importing two or three years ago have found their way back to distributors except, perhaps, when their demand is for commodity colors.
   “A lot of business-savvy fabricators say, ‘My forte is to have my guys cut and install countertops; that’s where my money is,’” says Primmer. “If there are four or five commodity colors he’s using a lot, then it may pay for him to bring in containers directly. However, they see the higher-end stones as being the niche of the distributor. We can bring in enough quantity and sell enough quantity in a short enough amount of time that it doesn’t hurt our cash flow.”
   Derek Nordstrom, Cold Spring’s director of sales/commercial division, agrees. While he says Murphy’s five percent figure may be a bit low – he postulates closer to 10 percent of fabricators are doing some importing – he says much of it focuses on the fabricator’s top colors, or those of his top commercial customers.
   “You’d have to be the smartest person on the planet if you import and can always turn a container real fast,” says Cold Spring’s Rea. “If the market softens and you end up with a lot of inventory in colors that aren’t in demand, there’s not much you can do besides cut your prices and move the product.”
   He adds that part of the issue is marketing, and that’s an area many fabricators aren’t anxious to get into.
   It’s those unexpected costs that ultimately may discourage some fabricators once they take the plunge into importing. Murphy ultimately compares it to having a baby.
   “It’s not just a little creature you take home; there’s all the miscellaneous stuff you have to have, and keep on having,” he says. “If you import you need extra equipment and yard space, and at least two people to handle a bundle. How do you handle it safely? How do you sample it? How do you direct your sales efforts to turn this inventory back into account?
   “Those are the things most fabricators who are intending to get involved don’t budget for, but once they get started, they can’t stop.”
  
THE NEXT BIG THING?
   Ten years ago, very few people might have predicted that granite would take over the residential-countertop market, or that literally hundreds of colors of the products would be available at prices from the ridiculously low to the breathtakingly high.
   So, what’s looming as the “next big thing” in the natural-stone market? Again, a lot of the answer depends on who’s giving it. Among the strong contenders, though, are limestone, travertine, onyx and – in some markets, at least – marble.
   Limestone and travertine, of course, are already big sellers, but limestone is mainly seen as an exterior façade material, while travertine is most often associated with tile floors. However, both are attracting new uses, such as backsplashes with granite countertops.
   “Travertine has always been very good and very durable for countertops,” says Dente’s Primmer.
   Trade International’s Matthews notes that some 500 containers of travertine are sold in Florida alone each month, and while a lot of that is going to flooring, its greatest attraction often is its pricing.
   Not only is limestone a valuable construction stone, but Rock of Ages’ Swenson says it offers something that some buyers are looking for: less movement than found in granite.
    “If they want a fairly homogenous look, a beige look, that’s what they’ll buy,” Swenson says. “A lot depends on individual taste.”
   “Limestone is definitely becoming more popular for kitchen use,” agrees Cold Springs’ Nordstrom.
   While those two materials are definitely work-a-day, onyx is not. However, this true exotic is finding a place in more higher-end jobs.
   “We have people coming in for lighted onyx backsplashes and lighted onyx bars,” says AGM’s Antunes. “These are even for kitchen applications. I don’t know how long this will continue, but the material is so beautiful and really breathtaking if used in the right applications.”
   While it may not be something for every kitchen and every bathroom, World Wide Stone’s Schweiss says his company recently completed a new Las Vegas casino where onyx made a real splash.
   “We backlit 32” X 32” panels, and the whole back bar of the restaurant lights up,” he explains. “The bar also lights up, and people say, ‘We didn’t know you could do that.’ There are areas where it can’t be installed, but when you’re accenting or creating a focal point, the material is just incredible.”
   Of course, some people are saying the same thing about marble, especially white marble, which is making its own comeback of sorts. Although one supplier describes it as, “an also-ran,” the demand for that long-time industry standard just hasn’t grown at the same frantic pace as its competitors.
   Both Trade International’s Matthews and consultant Murphy say it remains strong in upper-end commercial projects, especially interiors where the image is opulent. However, it’s showing back up in at least some American kitchens – those where Antunes says the owners are going for more of a European look.
   Primmer agrees that the look if often European, as is some of the stone itself, although Vermont marbles are also popular. He adds that consumers looking for something different seem to be fueling marble’s resurgence.
   “People also want something unique, and they’re designing their homes around it,” Primmer says.
   While there’s no indication they’ll be big, Matthews says he’s seen increased demand for both sandstone and basalt. While both are common stones, he adds that interest in the basalt seems to come both because of its breadth of colors and its hard, textured surface.
   Primmer says he’s also noticed that more people are looking for different textured finishes than ever before. Cold Spring’s Nordstrom agrees, and says whether people are buying another stone – or even granite – they’re not always settling for a polished finish.
   “Finish is going to be more important,” Nordstrom says. “People may want their stone honed, or brushed or with an antique leather finish. All those will start gaining popularity.”

This article first appeared in the February 2007 print edition of Stone Business. ©2007 Western Business Media