by Thomas Foschini06   Agosto   2014

The green economy, the final frontier for Chinese tiles

The local construction market is slowing down and hence the profits in the mid-range of the market is also falling off. Manufacturers for the high end of the market and exports are increasingly interested in the quality and reliability of Italian technology. The Chinese government is starting to impose a “green revolution” on manufacturers.

Merciless competition in technologies, where the advantages of the Made in Italy brand are exhausted – at least apparently – over just 6-8 months. Unsustainable competition in pricing – and taxes – which many consider to be unfair. And, as if that were not enough, a construction market which after years of double figure growth, is now starting to slow down, with the last positive figures dated the first quarter of 2014. This is the context in which Italian manufacturers of ceramics machinery and equipment working in the Chinese market have to work every day.
 

We discuss the situation with 6 leading companies working in various steps of the ceramics supply chain. Leading companies in their various fields which have all chosen to keep their production and technology based in Italy, and which are present in different ways in the Chinese market – some with local sales and even manufacturing, others working with local dealers, others yet growing their profile in the Far East, especially Indonesia, where the most open (and, in some ways, fairest) game is being played between global ceramics technology players, including the Chinese, with the aim of reaching traditional foreign markets like Australia and the USA.
 

“Even during this slowdown in the construction market – says Orfeo Finocchi, Far East Sales Area Manager, System – the major Chinese companies are still looking for opportunities for growth, investing above all in decorations for floor and wall tiles with better definition and colour”. In particular, System’s flagship offering for the Chinese market is Creadigit, a digital decoration system, as Finocchi explains, “which gives 400 dpi resolution even at very high speeds while handling large amounts of ink,” thus achieving a colour intensity which the much cheaper local technology suppliers can so far only dream of. This is backed up by the numbers: in the first 12 months since the product’s presentation, System has sold 60 machines in China, “with some companies having as many as 12 machines on their lines,” while for companies which operate 24/7, “the reliability of the machine and our prompt, flexible and collaborative aftersales service is key,” Finocchi, who manages 3 branch offices and as many representational offices from the Suzhou head offices, concludes. 
 

The technology is thus key, but so is the target. “Even in China – says Luigi Tirelli Prampolini, Middle East, Far East and North Africa Area Manager, Bmr (Scandiano) – tile manufacturers working in the mid and high price sector are emerging, and they are interested in the quality and above all reliability of our machines.” Still a new market for Bmr, specialists in tile cutting and lapping solutions, with their local head offices based in the more “open” and nearby Indonesia. “And yet –Tirelli Prampolini continues – at Ceramics China (held last May, ed.) we met for the first time a concrete interest among Chinese manufacturers for solutions like our Squadra Dry cutting system or the Leviga 2 lapping machine, which appeal for their flexibility and long-term reliability.”
It would seem that the strong competition – which regards not only international manufacturers working in China but also local manufacturers, who are daily chasing after competitive advantage and profitability, given the current contraction of the market – is accompanied, among Chinese ceramics manufacturers, by another trend, which companies from Sassuolo are well prepared to benefit from: that of finding solutions which provide both excellent product quality and long-term reliability which makes price of purchase a secondary consideration, rather than the sole criterion for investment.
 

It is true that the Chinese market is complex. “You can hardly understand anything about the Chinese market – says Mauro Masini, General Manager, Sacmi Hong Kong – if you don’t start with the local mindset, for which the concept of future has always been foreign.” The experience of Sacmi, a global player in industrial plant which exports 80% of its turnover and has had commercial operations in China since the Seventies, and its own offices there since 1992, is emblematic. “We got into this market– he explains – in a simpler period, when no-one really believed in the potential of China. We started out with a local dealer, selling our first press, then with complete plant solutions from presses to kilns, from grinders to atomisers”. The story is full of incident, since every new proposal was, in a certain sense, crippled by local manufacturers’ incredible speed in imitating and adapting new technologies, and by fiscal policies which supported local companies and made competition on price effectively impossible. Sacmi’s strategy, which has enabled them to sell 4,500 presses in China, between the parent company and its subsidiary Laeis, has four main points: always keep at least one step ahead of the competition in terms of quality, repeatable results and long-term reliability; always work in close touch with the client, “working where there is a strong concentration of businesses in your sector, and offering real time aftersales service, from spare parts to technical assistance”; make the high end your focus – especially in recent years and months – i.e., target companies working in the prestige end of the local market or in exports; and, finally, manufacture at least part of your product locally, thus bypassing customs. And if the competitive advantage they have gained in presses turns out to be short-term, Masini says, “there is enormous potential in kilns – with our Sacmi Forni and Riedhammer  brands – as well as grinding and drying solutions in line with the new directives issued by Beijing  on consumption and pollution.”
The green economy, the final frontier. Maybe this, when all’s said and done, is the competitive advantage Italian technology providers need to focus on, if they are to consolidate and grow their presence in China. The approach consists in proposing individual technological solutions, such as Sacmi kilns with, for instance, their hot air recovery systems, which can reduce consumption and emissions during firing, but also increase the efficiency of the line as a whole, by serving the dryers – to take one example – “without overloading the kiln – as Masini says – and maintaining total control of firing curves.”
 

Or – and this is where Siti B&T, Formigine, stands out –consolidating one’s long term presence in the country by building a totally eco-friendly factory in the city of Gaoming and, as Valter Cappellini, Director, Business Development, for the company, says “continuing with our existing internationalisation and working in close collaboration with the our Italy Engineering and R&D divisions.” A solution, he says, “which means above all being close to and providing outstanding service for our clients, with even more efficient assistance, thanks to our advanced digital laboratory.”
 

Green production – combined with the need for efficient production lines and constant quality output – will probably be the winning cards for companies working in China, in line with the new direction drawn up by the Chinese Government, which is laying the foundations for what economists would call a “mature” Chinese market: “The requirements of Chinese ceramics – says Paolo Malagoli, China Branch Manager, Tecnoferrari, who has been working in stock management in China for over 15 years – are starting to approach those of traditional markets. Many clients want to offer genuine product innovation, and to market product which is truly beautiful and not just an imitation.” This explains the current trend to invest in digital decoration, Tecnoferrari’s focus in the last two years and an area of great interest to Chinese manufacturers; a business “which is certainly not new to China, with a huge number of machines now in service there.” This is why, Malagoli says, “we have to focus on collaboration and partnerships with the businesses and areas we want to work in, and target companies for whom assured quality standards are key.”
Beijing’s involvement in industry is a factor that all players can agree on: “It is fascinating to see – Malagoli makes a point of observing – how politics sets the agenda for the ceramics industry. This year the government is pushing companies to reduce their consumption and pollution and forcing them to invest, while also applying restrictive policies to the real estate market, which have created a contraction in demand”. Such policies have reduced the profits for mid-range solutions, and forced Italian and other companies to focus specifically on top of the range solutions, such as bigger and more powerful presses for large formats, or the new digital decoration equipment, as noted previously. But also plant capable, overall, of satisfying new pollution legislation. To sum up, the key will be the capacity of companies to fit in with that “real market socialism” which is slowly bringing the Chinese ceramic market up to European standards, by degrees and not without problems – and with it, the country as a whole. A China, as some of the major players say, which is starting to deal with the concept of future, a concept which Italian companies have long had to make their own, to survive and flourish.