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raportIt is always so that in the July issue of our bimonthly we devote the most space to companies which supply stonemasons with block materials, slabs and plates. What is then the wholesale market like, what tendencies could be seen and, finally, what is the condition of companies that operate in Poland? Like every year we asked these questions to a group of entrepreneurs.  

Stone market is undoubtedly one of industries which are very sensitive to the factors that determine the global business environment. Careful readers of Świat Kamienia will not be surprised that in order to outline some trends that are visible on the Polish wholesale market we asked about the situation on the Far East. After all, while reporting on the recent Xiamen Stone Fair (6-9 March), we wrote about the announcement of revolutionary changes in the trade of imported materials.

At first we should ask about effects of the global agreement between the giants of the forwarding market. Let us remind some facts. In early 2017 “the big four” (CMA CGM, COSCO Container Lines, Evergreen Line, Orient Overseas Container Line) joined forces in container logistics. These companies announced the change of delivery conditions starting from spring 2017.

– There is no doubt that wholesalers pay much more for stone from the Far East now than in mid 2016, but there are many factors which contribute to the rising operating costs of companies that deal with importing stone from all over the world – says Jarek Świadek, the managing director of HGS. – The biggest change can be seen in the segment of the cheapest stones where transport costs / material costs ratio is the highest. Obviously, it is hard to generalise, because the average price increase is from $100 to over $400 per container.   

Stone market has had problems with sea freights for at least a year. At first, high freight price fluctuations were surprising. The prices varied depending on stock exchange quotations. - If it comes to goods imported in containers from China, the transport cost factor is very important, especially when we deal with high import volume – emphasises Tomasz Staniszewski from Inbra Polska.

How did those symptoms influence the condition of wholesale outlets?

RENAISSANCE OF EUROPEAN STONES?

It seems that the market is ready for such “revelations”.

– I am happy about the price increase because we quit using materials from the Far East a long time ago. Now we are using Spanish and Portuguese ones – says Tomasz Dulemba from Marmury Dulemba from Kobielice. – I can say that we carefully read the market signals and got ready for problems with more “colourful” granites – I mean the growing risk of getting a worse quality material from deposits that are running out. The first symptom of a worse quality material is its colour that does not meet standards. In short, in our offer there are very good substitutes for them – these are grey and yellow Iberian granites.

We also need to say that another material may come back to fight for customers. It used to be a very interesting alternative to Chinese materials which have a very bad opinion among customers.

– As soon as the economic situation in Ukraine improved and our neighbours became more open to Europe, we decided to get interested in their granite deposits again – says Laura Rychlik from Granstein from Strzegom. – Stone deposits on extended Scandinavian tectonic plate meet durability expectations in the European climate much better than the Far East material. This causes a large interest among stone industry specialists in a flagship material called Tolkowski granite. High specific weight, uniform intense colour of our stone, satisfying thickness and fine grain of rocks coming from Ukrainian quarries ensures top quality of the final product.
Another advantage is the fact that extraction industry in Ukraine may be proud of modernized raw mineral extraction technology which enables to eliminate material losses. Diamond wire cutting is the most popular, so, in effect, granite which is separated from the deposit creates regular blocks. - Thanks to those new technologies, good contacts and agreement with the leading logistics operator we may ensure our customers constant supplies of prime Tolkowski blocks – adds Laura Rychlik. – Our goal is to restore this unique material to its former glory.  

Let us add that Landpol Plus sp. z o.o. company is responsible for the transport. The location of the company in the “aggregate centre” in Lower Silesia as well as well-qualified staff who know the industry and local conditions ensure high service quality. The stone may be bought straight from the Strzegom warehouse owned by Brachot-Hermant company.

TAKE IT EASY, IT IS JUST A BREAKDOWN

Experts on China think that we are facing hyper-competition right now. The decisive factor seems to be … making the competitors' losses bigger. Confrontational strategies are about developing businesses at the expense of competitors. In extreme cases it may be about destroying them totally including taking over the market. What does it mean? We know that in case of oversupply, the stone gets cheaper. The smaller and smaller margin may be saved by phasing-out of mines (usually temporary), which obviously raises interest in a scarce type of stone on the market and usually leads to higher price in wholesale outlets.

– Problems with rising prices of scarce granite deposits from China or India are nothing new this year – says Michał Furmanek. – Our experience shows that the market can do very well in situations like this by offering substitutes. To conclude, we see rising costs of extracting stone from the Far East as a good move of those authorities since in their announcement they say that this is caused by their care for environmental protection. Temporary halt or phasing-out of mines is nothing special then. On the contrary, it is typical for our branch.  
Recently, New G603 has replaced G603 and, consequently, there are now more incentives to contract supplies of New G654 at a promotional price (late May 2017) because G654 mine is supposed to be closed this year – encourages a representative of the Chinese market not mentioning the fact that official press announcements say about phasing-out extraction in 2018. Announcements like this, however, have no influence on the meetings with contractors.

– Since the beginning of the year we have recorded greater supply of stone on the market – I mean both blocks and imported slabs, but, unfortunately, it is not the same with demand. The demand is not higher and most customers are not keen on creating high levels of reserves – reveals Tomasz Staniszewski. – This strategy turned out to be the right one, because appreciation of the Polish zloty against, especially, the US dollar shows that purchasing in winter time (and also paying in that time) reduced the sales profitability in spring. When speaking about scarce types, we have to mention high-grade black stones but also some materials which production, due to various reasons, is small or became reduced drastically, for example Verde Bahia from Brazil and Madura Gold from India. If it comes to the oversupply, we need to mention Impala from South Africa and many types of Rustenburg, but their quality and colour are of average quality.

In short, effects of global changes seem to be delayed, especially when we look at them from the perspective of a small market player like Poland, a country that is working its way up with small middle class. Our market suffers from the fact that, for example, when it comes to any investments with the use of stone, money transfers are often delayed.
– Much smaller wholesale of stone this year has been caused by a giant oversupply and full stocks – says Dominik Lis from Finnstone company.
The bigger the contract for stone the longer deadline, so there is a risk of freezing a huge capital of wholesalers.

RANGE OF PRODUCTS     

Among the products we can find mainly natural stone, but there are also sintered quartz and conglomerates. Press announcements tell us that technologically processed stone should have the biggest share in the offer of a wholesale outlet. But it is not so.

– Black granites are popular again. They are often used for making kitchen tops. It is enough to say that proportions of quartz conglomerates and natural stone shares have reversed – the latter one represents again 60% in products – says Tomasz Dulemba. – Obviously, we are interested in promoting Neolith brand. We have been a distributor of this brand for over a year and we are planning to organise trainings in processing of this material soon.  

Does purchasing look different this year than last year? What changes can we observe?

– First quarter of 2017 was the best in history! Double digit sales growth was recorded in the first three months of this year, but the second quarter looked completely different  – when compared to the same period in 2016 we recorded a large drop in sales  - says Michał Furmanek. – Looking for the explanation to this situation, I think it was the weather which was responsible for it. Spring came very late this year. Easter, holidays in May did not help, either. If it comes to pricing, nothing has changed. In early June, however, we recorded symptoms of some improvement.

According to the Pareto principle, from the point of view of warehouse management these important elements represent about 20% because they are responsible for about 80% of sales. How about the sales in stone warehouses? Our survey shows that materials (types of stone) which sell quickly usually represent around 30%. It means that the remaining 70% is not very important for the order portfolio, but every good wholesaler should offer a wide range of products. It is usually so that onyxes – one of the most expensive materials – do not show that a company is profitable, but they are niche products which means that the margin is satisfying. Wholesalers fight for stonemasons' portfolios in various ways. Those that are worried about low margins cut operating costs by, for example, quitting delivery service which is included in the price of the material or even by limiting “warehouse airing”. Some are improving their websites. More and more online business cards are showing up-to-date stocks and offer various search filters to their logged-in users. In most cases the access to orders or even wider view is available only to registered users-entrepreneurs.

OFFENSIVE OF WHOLESALE OUTLETS

We have been saying for years that wholesale market will face consolidation of smaller players. The first company that consolidated warehouses under a recognizable brand is Granit-Color which owns a well-organized distribution network (including Slovakia). The headquarters of the company are located in Ostrowiec Świętokrzyski and wholesale outlets which work as partners (franchise agreement) can be found in more than 20 locations – concentrated mainly in East Poland. Some warehouses, however, have disappeared recently (in Radom or Lublin, for example).

Let us compare the above with debuts. The warehouse in Szczecin, for example, is an initiative of Tiera Stones Sp. z o.o. Sp.k. whilst the warehouse owned by Granex ZPH s.c. can be found near Kielce. R&R Granity found its place on the Warsaw market in early 2017. So did Stone World from Tarczyn in Katowice. A new warehouse can be also found in Łódź – this one is in the hands of Olgran Sp. z o.o. Sp.k. The latter company deserves some attention because this new company launched its sales offices in three provinces: Łódzkie, Silesian and Lower Silesian. Łódź-based stone wholesale outlet owned by Magma, on the other hand, has extended its capacity and stock by as much as a third.  

This is not a complete picture, because we can also see that some companies quit their wholesale outlets in some parts of the country. In Sosnowiec, for example, the branch of Hurtownia Impali CB J. Kiszkiel & M. Jastrząb sp.j. was closed. Levantina Sp. z o.o. decided to close its warehouse in Gdańsk. We can also notice changes of addresses, so in this case the number of branch offices is not reduced. For example, Marble & Quartzite Polska Sp. z o.o. wholesale outlet in Tychy has been replaced by a warehouse in Będzin (it was opened in spring 2017) and the new warehouse by M+Q in Warsaw will be moved to Łazy in August this year (further information – and especially an up-to-date list of wholesale outlets broken down into provinces – is available on our map of wholesale outlets). This long list suggests that information about new warehouses cover the announcements about closing warehouses. The sector of suppliers for whom immediately available material is the most important is getting stronger. So, rumours that this business is not profitable should not be taken seriously.     

– Professionalization of the industry is a permanent and more and more visible phenomenon. - says Tomasz Staniszewski. – I think it is just a matter of time to see more mergers or takeovers (like Svimpex-Emmaboda) on the market. Another step? The industry must make its export offer more popular in (at least) neighbouring countries. Huge production potential created with support of EU funds will be used properly then.  

Just a decade ago the capital city of Poland was the most successful in attracting those that wanted to invest in stone warehouses. But in early 2010s wholesalers in Silesia got stronger. What is more, this mining region is still powerful which can be proven by the fact that the most impressive company seat (a huge complex in Wojkowice which was built nearly two years ago) is owned by WKG company. The company specialises in rock mining and is more and more successful in providing Czech companies with Raciszyński travertine.   
Other offices, right now in the form of branches offering ready made tombs, work at the initiative of stone companies located in border regions, for example in the Czech Republic. Perhaps we should expect offensive of wholesale outlets. Let us remind that apart from wholesale business in the strict meaning of this word there are also a lot of stone companies – usually they are owned by large manufacturers of stone goods or they are just authorized representatives of particular products.

– Although stone and stone-related wholesale is not a core business of our company, we specialise in offering so-called partial slabs – for example half slabs – explains Tomasz Dulemba. - Our offer is interesting for local stonemasons for whom buying such a material is a kind of remedy for works that need less lost material. We stick to the rule that we sell only to stonemasons. Wholesale is wholesale, so we are not going to serve, for example, architects or individual customers by offering them slabs. We send these customers to our processing plant where they can get final products, often with installation.  

Supply of this material is not the core business of this company. Stone production is. According to the information we gathered, the demand for “partial material” has been growing since prices of white Carrara marbles (Carrara, Calacatta, Statuario) increased by 100% in the last few years. How about Polish materials? In early June we could see shortages of Strzegom granites, but this is a kind of normal, so most probably this stone will be available in autumn again.  

Rafał Dobrowolski
Photo by R. Dobrowolski

Hyper-competition has come

Michał Furmanek, manager at Furmanek Trading:

The market is oversaturated with bulk material to such an extent that we can speak about hyper-competition. For us, higher quality is a priority because we believe that a good type of stone will defend itself. Our wishes, however, do not always become reality so we have to do our best to make our business look as we want it. We still have to choose between selling at a lower price or maybe at a little higher but with quality guarantee?

Chinese stone is still strong

Jarosław Świadek, managing director of HGS:

It is said that because of environmental restrictions availability of the granites from the Far East will be going down. For sure we will have to say goodbye to some types of stone. But we can be sure that the giants of the market will prevent Iberian granite from replacing more scarce ones. I am sure of it because I have visited China recently in order to contract supplies of a new material. It turned out that the material some people were sure will not be sold any more will be still available.

Tolkowski's comeback

Laura Rychlik, Granstein company from Strzegom:

Contacts with the Ukrainian extraction branch contributed this year to the re-introduction of some materials in the Polish wholesale market. Right now we are developing stone trade mainly in Lower Silesia (stone arrives there by train), but soon we would like to develop our sales in other provinces and also in neighbouring countries. Since we launched our railway siding, we have been transporting our raw materials by train. Good cooperation with local stone companies enables us to offer stone slabs in any thickness.

STONE SCULPTURE SHOW

wystawaThis year's edition of Stone fair will include a stone sculpture show during which works made at the international symposium in Orońsk will be presented. The visitors of the fair will have an opportunity to see stone sculptures made by students from Poland and Finland. This year's edition of the international symposium was entitled “Initium”.

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MARITIME INDUSTRY IS AS STRONG AS A STONE

portThe 5th edition of the International Maritime Congress was held on 8–9 June in Szczecin. The congress serves as a discussion and meeting platform for maritime economy representatives. During the meeting we could hear about the infrastructure investment plan which involves spending a billion zlotys (ca. €250 million) on the ports in Szczecin and Świnoujście during the 2014-2020 EU funding period.

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SCHOOL FOR STONEMASONS-TO-BE

szkołaThe new school will be set up at the Border Protection Corps School Complex in Szydłowiec. This new professional first-level school will be teaching students who want to become stonemasons. Middle school graduates are free to submit their applications to the school office by 28 June 2017.

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STUDENTS RESTORED THE 17TH-CENTURY GRAVESTONE

płyta newsRestoration of an old gravestone was a part of the internship organised by the State Construction Schools in Gdansk. The students needed a few weeks to restore the former splendour of wooden furniture, iron medieval nails, silver cutlery and a gravestone made of sandstone.

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