A big piece of news hit the surfacing market recently: Quartz manufacturers got served in court via an anti-dumping lawsuit. OMG. Wow, I can’t believe that. This could be bad… or good….or wait, what is dumping? Let’s back up and see what happened.
Here is the actual headline: “CAMBRIA COMPANY FILES ANTIDUMPING AND COUNTERVAILING DUTY PETITIONS ON QUARTZ SURFACE PRODUCTS FROM CHINA”
Great!? What does that mean?
The Technical Description:
An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value. Dumping is a process where a company exports a product at a price lower than the price it normally charges on its own home market.
Countervailing Duties (CVDs) are tariffs levied on imported goods to offset subsidies made to producers of these goods in the exporting country.
What that REALLY means:
In summary, if you sell it for less than it cost you to make it, you are “dumping” it. So the accusation made by Cambria here is that China is selling quartz for less than it costs to make it.
- The US was the largest market for Chinese quartz in 2017
- Over $709 Million dollars in Chinese quartz was exported to the US in 2017
- 301 Chinese producers were named in the lawsuit by Cambria
Alright, so China is selling quartz for less than it charges in its home market. So? Isn’t that because labor rates are cheaper, blah blah blah…
No. Not really. “Countervailing duties” is important here because this is where the government or other entities may be subsidizing some of the costs, thus making it cheaper to produce, as all of the costs of manufacture are not burdened by the selling company. These could be incentives to encourage domestic productivity or employment, but once those materials are exported to another country, those subsidies enable dumping, since actual costs are offset by subsidies, making the “real” cost, hard to determine.
Well, the theory is that this means the domestic manufacturers cannot compete, because the prices are much lower, so they lose market share to cheaper Chinese quartz. Also, the countervailing duties imply that there is an entity that is providing subsidies to the manufacturer, which are then allowing the manufacturer to sell goods cheaper in another country.
For example, in the US, farmers receive government subsidies and then sell goods overseas at less than the cost to produce them, given prevailing market prices. (This gets a lot more complicated, but this is the gist of what dumping is, and that the US does it too.)
Dumping has occurred in many industries: steel, computer chips, healthcare and many others. Anti-dumping measures have been applied to protect US producers in some of these instances, but there is a process involved.
The short version: the petition is filed and the USITC has 45 days to conduct a preliminary investigation to determine whether the claim is valid, which is considered an “affirmative” or “negative” finding. If affirmative, the investigation continues and an antidumping, or countervailing duty order (AD/CVD) is issued, which is enforced by US Customs. This order is often considered a “protectionist tariff” – basically a fine to try to level the playing field in the domestic market.
But let’s get down to the real point. Anti-dumping measures typically arise when something becomes commoditized, and the competition so great because the demand is so high. Too many entrants mean they have to add value somehow, and eventually, the only thing left to compete on is a price. This is when people start dumping product because there is too much production capacity, or the industry is so heavily subsidized in certain countries.
So, for the surfacing world, that means that quartz countertops are a commodity. Which means that it has lost its luster or exclusive appeal. The introduction of cheap Chinese quartz has devalued the North American-made brands like Cambria and Hanstone, as well as European brands like Santa Margherita and Israel-based Caesarstone.
At least Cambria is doing something about it and trying to protect its brand. It can not flip a switch and lower its costs to compete with subsidized Chinese quartz.
So, what will happen next? Who knows, but some distributors (many who import and private-label quartz) have responded and refuted Cambria’s claims, making a case as to why they are not valid, but they have a vested interest in the success of cheap Chinese quartz, so it is hard to distinguish what the motivation is at those companies.
Regardless, commodities compete. Commodities drive price down. Low price means cheap. Cheap is not attractive. Sounds like time for some more modern surfaces. There are some really beautiful new materials on the market that are not quartz. So, join the movement, jump off the bandwagon and start using materials that are truly value-added and unique.
Visit us at www.modern-surfaces.com.