Hard-Surface Year in Review: 2023

Silicosis heads the list of top news for the year, but there's plenty of other areas that made the headlines in the world of hard surfaces.

00:30  Intro
01:01  Silicosis Update: Australia, California
04:30  Caesarstone Reorganizes, Closes U.S. Factory
07:34  A Word from Quantra
08:47  Manu Shah, MSI Founder, Retires.
11:01  Tariffs: India Quartz Rate Re-Reset, Section 301 Appeal
14:47  Trade Shows Continue Revival in 2023
17:14  Cosentino Plans U.S. Florida Factory; TN Tile-Slab
20:47  Polycor Acquires All of ROCAMAT
22:01  Outro

This edition is brought to you by Quantra.

Radio Stone Update is presented on the first and third Wednesdays every month at 9 a.m. everywhere on Earth with the latest news and insights in hard surfaces. Check our archives at www.radiostoneupdate.com.

Transcript

00:30

K. SCHIPPER: Hi, I’m K. Schipper for Radio Stone Update. Joining me today will be Emerson Schwartzkopf, publisher and editor of Stone Update, as we take a look back at the top stories in news of the hard surfaces industry for 2023.

Unlike many years when the news slows down as the new year approaches, 2023 is keeping us guessing right up to the wire. Leading the list is the crackdown in crystalline silica in both California and Australia. And, competing for attention is Caesarstone Ltd., which continues to work through a trying year.

Emerson….

01:01

EMERSON SCHWARTZKOPF: Silicosis isn’t a new hazard in hard-surfaces – medical studies found the fatal lung-congestion in the 1930s with Vermont granite workers. However, a rise in cases around the world is leading to major changes in government regulations with man-made products.

Australia took the drastic action of banning engineered stone – quartz surfaces – starting in mid-2024. Health officials from the country’s regional governments voted unanimously on December 13 to stop new use of the material and require licensing of any business handling surfaces now in place.

The move came after mass lobbying by Australian trade unions and intense coverage in national media of worker suffering. Research pointed to dust created by the fabrication of engineered stone, which usually contains more than 90% crystalline silica by weight, as the major catalyst for increases in silicosis cases.

Australian health officials rejected an option to allow use of engineered stone with 40% or less silica content, noting that there’s no existing scientific evidence that lower levels reduce the risk of silicosis. Major quartz producers Caesarstone and Cosentino had already offered products meeting the 40% silica level.

Some 24 hours after the Australian ban vote, a California workplace-health board approved stricter regulation of hard-surface slab fabrication in response to an increase in silicosis cases in the Golden State.

The California Occupational Health and Safety Standards Board approved emergency standards for one year that mandate wet fabrication, access for workers to a battery of respiratory health tests, use of full-face respirators and other requirements in a fabrication shop. The standards will take effect by the end of this year and will likely be made permanent.

The California action came after a 10-month process where state workplace-safety agency Cal/OSHA, industry officials and others worked to develop the new regulations. During that time, a medical study documented silicosis cases of engineered-stone fabrication workers, and Los Angeles County proposed its own ban on high-silica-content surfaces.

The new standards affect all shops handling slabs of artificial stone containing 0.1% or more, by weight of silica … and natural stone with 10% or more, which will effectively include all hard-surface fabricators in California.

And, in Spain, Cosentino settled a 15-year legal case concerning five workers at a third-party fabrication facility. The workers received a settlement of €1.1 million and company chief Francisco Martinez Cosentino received a six-month suspended sentence for five counts of serious injury due to gross negligence.

A Spanish judge ruled that the manufacturer of Silestone failed to accurately label the silica content of the material but held the third-party facility owner liable for protecting worker safety. Cosentino noted this was “a specific case” and isn’t applicable elsewhere.

04:30

SCHIPPER: A pioneer in the quartz surfaces industry ended the year on an uncertain note last week when Caesarstone Ltd. announced the closing of its Richmond Hill, Ga., manufacturing facility in mid-January.

The move is consistent with a restructuring plan announced in mid-2023, and will save the company $20 million as it outsources more of its production. Caesarstone expects to incur restricting expenses and a one-time non-cash impairment charge of $45-$55 million in fourth quarter 2023.

The Richmond Hill plant opened in 2015 and employs approximately 200 people.

Last December, Caesarstone announced it was reducing its worldwide workforce by 10 percent. At that time, the company blamed the cuts on what it called the ongoing slowdown in demand for surfacing products. Media reports then estimated Caesarstone would lose approximately 200 jobs.

Then, in March, Caesarstone announced that Yosef Shiran was returning to the company in the role of CEO. Shiran led Caesarstone from 2009 to 2016. In announcing Shiran’s return, the Caesarstone board of directors said it felt Shiran’s familiarity with the company would provide unique value, agility and insights as it restructured itself.

In May, Shiran announced plans to close its original quartz-surface factory in Israel. Shiran called the closure painful but necessary and said the company would continue to operate its four production lines near Karmiel, Israel, and the two lines at the Richmond Hill, Ga., plant.   

Caesarstone reported net losses in the first two quarters of this year. At the end of last month, it reported a net loss of $887,000 for third-quarter 2023, or almost double from the same period last year. At that point, company officials cited weakness in revenues from the United States – Caesarstone’s largest market – as well as Canada and Australia.

Third quarter sales in the U.S. were down 25.3 percent. Much of that is attributed to softness in the North American renovation and remodeling market, and higher interest rates generally. The U.S. market represents 46 percent of Caesarstone’s revenue.

The company also is coming to grips with the decision by Australian authorities just last week to ban the use, supply and manufacture of engineered stone slabs containing crystalline silica beginning next July. The Australian market accounted for approximately 18 percent of the company’s total revenues in the first nine months of 2023.

Caesarstone officials have argued that their products are safe to fabricate under safe working practices, and it plans to appeal the Australian decision. In light of the dual announcement with the closing of the Richmond Hill plant, Caesarstone stock, which trades on the NASDAQ under the CSTE symbol, fell almost 10 percent.

08:47

Manu Shah, founder and CEO of M S International Inc., -- MSI – announced his retirement at the end of January after 47 years in the business. He remains with the company as CEO Emeritus. Although stepping away from the day-to-day activities of the company, he will continue to advise and coach some of MSI’s younger leaders. His sons, Rup and Raj, became co-CEOs.

Manu Shah was born in India as the youngest of nine children and came to the United States to study, ultimately receiving a master’s degree in mechanical engineering from Purdue University. While working days as an engineer, he formed MSI in the basement of their Fort Wayne, Ind., home with his wife, Rika. The company began by exporting microprocessors and memory chips.

Later, a change in the computer market led the Shahs to start importing granite. In 1983, Manu Shah decided to develop MSI full time. A year later he moved the family to Southern California to be near a port city. In the next year, MSI surpassed $1 million in annual revenue. In 1987, the Shahs opened the first MSI warehouse in Santa Fe Springs, Calif.

Today, the company is based in Orange, Calif., and the number of MSI warehouse showroom combinations is approaching 50 throughout the U.S. and Canada. In December of last year, the company announced it will construct a new 548,000 ft2 distribution hub in southeast Virginia, at a cost of $61.1 million.

MSI imports more than 70,000 containers per year, including hundreds of thousands of slabs of natural stone and quartz. In 2022, the company was acknowledged to be the 19th largest importer in the United States. With more than 3,000 employees, it has also been honored for its workplace culture.

Manu Shah has also kept his focus on giving back to the community, both locally and globally. He said he plans to continue his philanthropic efforts in his retirement, along with spending more time with his grandchildren.

11:01

SCHWARTZKOPF: Tariffs provided the first big story of the year, when the U.S. Commerce Department reversed itself – for the most part, anyway -- on raising anti-dumping duties with quartz surfaces from India. The agency’s U.S. International Trade Administration, or ITA, announced on January 4 that, instead of going to a proposed 161.5%, the rate would remain at 3.19% for most companies.

The proposed higher tariff came as part of a review by the ITA in July 2022 of the original unfair-trade duties set in 2020 against quartz-surface imports from India and Turkey. Two companies India missed a deadline – reportedly by hours, not days – to submit review data, and the ITA then reverted duties for that company to the original level of 323.12% sought originally in a 2019 complaint by U.S. manufacturer Cambria Company LLC.

Nearly every other quartz-surface exporter from India would then go to half that rate – 161.5 percent – except for Pokarna Engineered Stone. The ITA found that Pokarna, the producer of Quantra surfaces, didn’t violate anti-dumping rules and rated no additional tariff.

After an additional six months of review, however, the ITA reset the general anti=dumping tariff in January back to 3.19% for most Indian exporters. Pokarna retained its zero level, but the two companies with tardy data filings would be assessed the 323.12% tariff for its products.

The controversy isn’t over, however. The two companies with the high tariffs filed an appeal with the U.S. Court of International Trade; so did Cambria and other Indian producers over the ITA’s decision. The cases will be heard in a New York federal courtroom in 2024.

The Court of International Trade also figured in another area involving hard-surface imports. A three-judge panel ruled in March that the 25% Section 301 tariffs on virtually all Chinese goods would stand.

The judges rejected arguments by more than 3,600 companies, including a more than 30 U.S. hard-surface importers, that the U.S. Trade Representative, or USTR, didn’t follow proper guidelines set by the U.S. government and the World Trade Organization.

The USTR imposed the universal tariffs in 2018 as part of the Trump administrations actions to prod China into a new trade agreement with the United States. That didn’t result in a new agreement, but the Biden administration is continuing the tariffs.

The issue now goes to the U.S. Court of Appeals for the Federal Circuit in Washington to be heard sometime in 2024.

Meanwhile, U.S. Customs and Border Protection, or CBP, continued to investigate attempts to evade the 300-percent-plus tariff on Chinese-made quartz surfaces, with several companies cited for shipping goods from China through Taiwan and Vietnam and claiming manufacture in those countries.

Another company claimed that its surfaces from China didn’t fall under tariff guidelines, as the product used fritted sand, a byproduct of mining and iron/steel production, as its main component. However, the CBP confirmed that the fritted sand is noted to be 60% to 80% silica and subject to the unfair-trade duties.

14:47

SCHIPPER: As COVID slipped more into the background of people’s lives, tradeshows worldwide came roaring back with more exhibitors, more attendees, and more excitement than any time since 2019.

Probably there was no question that The International Surface Event – TISE – and the Kitchen and Bath Industry Show – K-BIS – would draw record numbers after the two shows were scheduled to overlap in late January and early February in Las Vegas. In a bit of good news for attendees, organizers decided to allow individuals registered at one show to attend the other at no cost.

Even better, free shuttles connected the TISE show at Mandalay Bay and K-BIS at the Las Vegas Convention Center. Throw in the International Builders Show and the Las Vegas Winter Market and there was a lot more to do than play the slots. The end result: the co-located shows drew an estimated 200,000 housing and design professionals, including 40,000 attending K-BIS.

Nor was Las Vegas the only draw. In April, almost 27,000 attendees took part in Coverings in Orlando, Fla. The show, focusing on international ceramic tile and natural stone, almost doubled its attendance from 2022. Although 74 percent of the exhibitors were from overseas, 77 percent of attendees were from the United States. Forty countries had exhibitors at the show.

And, at the end of September, both Marmomac and Cersaie drew strong numbers to their annual events. Marmomac, the international exhibition for the natural stone supply chain held at Veronafiere in Verona, Italy, drew more than 51,000 visitors, a 10 percent increase from 2022.

Cersaie, the tile-and-bathroom furnishings expo, celebrated its 40th anniversary by just missing the 100,000 level in attendance in Bologna, Italy. The show admitted 99,319 visitors during its five-day event, up 8.8 percent from last year.

Marmomac drew more than two-thirds of its exhibitors and two-thirds of its attendees from outside Italy, with particularly strong showings from the United States, Canada and Brazil. Cersaie was more Italian-centered, with fewer than 50 percent of attendees coming from outside that nation, and only a third of the exhibitors.

17:14

Trade shows weren’t the only segment of the industry showing a positive face in 2023. Several surfacing manufacturers announced new facilities or upgrades to existing ones during the year. Leading the way is Cosentino America.

At the end of April, a budget advisory committee in Jacksonville, Fla., voted 6-0 to approve selling 330 acres of city land to the Spanish surfaces company for approximately $20.5 million. According to the Jacksonville Daily News, the land will be used to build a production plant with an initial estimated investment of $270 million.

The agreement is a first for Cosentino, designed to strengthen how it serves its biggest market. Ground is expected to be broken in early 2025, with an opening date of 2028. Closing the deal is dependent on a positive vote by the Jacksonville City Council.

Media reports note that Cosentino began working with the city last fall to acquire the land, which is located 20 miles east of the port of Jacksonville, just off Interstate 10. Reportedly, Jacksonville was one of three cities being considered by Cosentino for the plant, with the deciding factor the ability to acquire land and economic incentives.

The proposed facility, valued at $440 million, will be built in two phases. The first phase will include a 408,000 ft2 facility, with another 734,000 ft2 for support areas and two production lines. The first phase will employ 180 people, according to the Daily News.

Nor was Cosentino the only surfaces manufacturer making a major investment in the United States this past year. Brazil-based Portobello Grupo brought its first ceramic production plant in the U.S. online in late July. The Baxter, Tenn., facility is the first international location for the company.

At just under 1 million ft2, the facility is set on a 95-acre site and equipped with cutting-edge technology. The state-of-the-art plant includes technology for emissions reduction and recycles and reuses one hundred percent of the water needed for production. In its initial phase, the new plant is rated at an annual production capacity of 38 million ft2.

The new plant, located between Nashville and Knoxville, created more than 200 local jobs, and Portobello America’s CEO, Luiz Filipe Brito, says the facility offers the capability to provide innovative products and better service to its North American customers.

And, Stonepeak Ceramics, reaffirmed its commitment to excellence, innovation and customer service through an investment of $10 million in its Crossville, Tenn., plant. Projects include a multi-phase manufacturing upgrade expected to be completed in early 2024.

The update will provide Stonepeak customers with X-L-gauged porcelain stoneware slabs and high-end large format materials. Additions will include new polishing lines and 12-bar digital printing machines with state-of-the-art capabilities expected to enhance through-veining and expand the color ranges. The upgrades will allow the company to also stock higher inventory levels. A new warehouse management software program to improve stock management practices will also be added.

Chicago-based Stonepeak Ceramics is part of the Italian-based Iris Ceramica Group.

20:47

Manufactured surfaces aren’t the only products making industry news in 2023. In early September, Quebec City-based Polycor Group completed its acquisition of Rocamat, a leading producer of natural stone in France and a significant presence in the international building stone production industry. Polycor announced plans in late February to acquire the company.

Polycor has been a minority shareholder in Rocamat since 2018, when it took over control of five quarries in the French regions of Burgundy and Gard. Founded in 1853, Rocamat operates 30 limestone quarries across France, and four production plants, with 160 employees.

Along with the acquisition, Polycor will be working closely with the French group Verrecchia. That company has more than 30 years of experience in new cut stone construction and has established itself as a developer committed to becoming an expert on environmentally friendly construction projects.

The Polycor Group is active in Canada, France, and the United States with more than 80 quarries and 24 transformation plants. It employs nearly 1,500 people. Emerson….



For a transcript of this podcast, go to our website at www.radiostoneupdate.com. For Radio Stone Update, I’m K. Schipper, joining Emerson Schwarzkopf in wishing you a happy holiday season, and we’ll see you here again in 2024.