The Bluestone Market, Part I

  To deal with this, I simply developed a questionnaire and administered it to a variety of bluestone distributors, retailers, fabricators, masons, quarry operators, architects and architectural materials experts. I conducted my interviews by phone and also visited some in person – all over a two-month period.
  Most of the participants at the bluestone industry’s quarrying sources are privately held businesses, in an industry with little or no formal (or even informal) written market research. It is a segment made up of hundreds of — except for a few — relatively small and somewhat secretive quarry operators.
  In addition, there are a number of types of intermediate customers ranging from distributors, retailers, truckers and railroads, building contractors, architects, landscapers, installers, fabricators, masons, maintenance services, manufacturers’ reps and brokers – many of whom not only purchase, but also add value to, the stone after purchase from a quarry directly.
  Over the years, this stone has been successfully used for flagging, curbing and steps, rubble masonry, walls, bridge stone, paving material, sidewalks, memorial landmarks, crosswalks, gutters, patios, flooring, vault covers, bases of tombstones, porch posts, residential walls, trimmings and landscapes.
  More recently, bluestone has appeared in the form of residential countertops and sections of fireplaces. Applications are seen in both the interiors and exteriors of commercial as well as residential structures and related settings.
  The value creation and delivery business system for bluestone has many moving parts. It has resulted in, and endured over the years as, an efficient and high-quality-oriented variety of products, companies and customers.
 
WHAT IS BLUESTONE?
  Bluestone consists of small particles of silica cemented together by silica combined with a slight amount of argillaceous material. It is also described as a group of sandstones having properties that include feldspathic wacke typically consisting of feldspars, quartz, muscovite, chlorite and pyrite. The grain size and colors are variable ranging from coarse sand to coarse silt, with various shades of colors of blue, gray, brown, red, pink and green.
  The stone emanates from the mountainous quarries of Pennsylvania and New York; both states, naturally claim superior quality for their stone
 
STONE OF DISTINCTION
  Bluestone is credited by most distributors, retailers and brokers, as one of, the most-versatile decorative natural stone in existence today, whether used for landscape, paving or construction purposes. It dates back to the 1800s, when many high-profile mansions, buildings, memorials and landmarks constructed on the East Coast were built with bluestone from New York or Pennsylvania quarries.
  The reputation and prestige of bluestone migrated to the West Coast (California, for example) with the westward-moving New Yorkers, Philadelphians and others who wanted to take some of their native land with them. These were quite wealthy people who did not mind the added expense of shipping this stone thousands of miles; even today, West Coast customers continue to buy large quantities for the construction of luxury homes and other structures.
  The same applies to the Midwest, particularly the Chicago area. Consequently, the use of bluestone took on a notable aura of prestige as more and more high-profile personalities, architects and home builders insisted on bluestone as their stone of choice.
 
MARKET SIZE
  Bluestone’s current market size is very debatable. The annual value of quarried stone is estimated to be in the neighborhood of $150 million, based on the tonnage sold by quarriers. It is worth noting that much of the quarrying “hidden” in the New York and Pennsylvania mountains (which could be as high as 30 percent of the total production), may or may not be included in such numbers due to the secrecy of quarry owners – thereby making it quite difficult to get accurate and complete information on total production.
  Both the Pennsylvania and New York bluestone trade associations offer rough estimates, but even they could not verify the completeness of such information.. The state of Pennsylvania has a formal annual report on mining but their bluestone tonnage data were found to be erroneous and incomplete. The New York bluestone trade association produced a report (primarily for regulatory alleviation purposes) which had a total statewide sales and tonnage estimate which is reflected above.
  At this time, there is no credible market information gathering process within the bluestone industry.
 
MARKET GROWTH
  A sizeable majority of distributors, retailers and reps questioned are positive about the future for bluestone for both residential and commercial applications. On the other hand, many – including some high-volume sellers of the stone – felt that the demand for bluestone is at the highest level to be expected, due to a range of factors.
  On the demand side, the reasons include fewer migrations of wealthy people to certain areas of the country; little or no marketing promotion of the stone; the declining percentage of the residential population segment that could afford such a stone shipped to certain states; the fate of the overall US economy; anticipated higher interest rates and their impact on home buying and remodeling; and high freight costs for long distances
  Other demand factors include competing stones, including the indigenous stones mined in several states; new building materials seen as functional substitutes; impressive looking low-cost imports of natural stone from China, Brazil and India; and the growing popularity of artificial stone. One interview that stands out in my mind included the comment that you don’t want to be selling a stone that is going to be competing with stones imported from China.
  On the supply side, some questioned whether quarry owners could, or really wanted to, expand production all that much. While selling more bluestone would mean more sales dollars for quarriers, the rising costs at quarries make selling more difficult at today’s current prices and puts downward pressure on quarry profit margins.
  If this scenario is true, this could result in either smaller margins or higher customer prices throughout the bluestone industry. Higher prices for bluestone, unfortunately, could very well result in the stone pricing itself out of some markets, due to much-lower purchase costs of certain imports.
  Of course, all of this would vary by region and by type of end-use customer, not to mention the size and quality of bluestone reserve positions of the quarriers.  Bluestone, in some of its forms and applications, maintains its preeminent reputation in some regions of the United States as a very-sought-after stone. Its use as a high-quality paver continues to be secure for now, but how long will it be before imports and domestically produced manufactured stone take their toll on this, as well as other well-known American sourced natural stones?
  In my opinion, therefore, Growth in the Bluestone market will, therefore, hinge on reversing or overcoming some of the negative factors and market forces in play, as well as the industry players finding a way to create more value to customers than competitive stone and non-stone products, as well as other building and landscape materials.
  Next time: Bluestone trends, pricing and competition.
  Thomas H. Kieren is president of the Manhattan Consulting Group, based in New York City and Oak Ridge, N.J. The firm specializes in market, competitive and industry research for executives of companies and their investors who are involved primarily in commercial and industrial companies. He can be reached at  973-697-6976 or manconsgroup@earthlink.net.

This article first appeared in the April 2004 print edition of Stone Business.