Episode 05 - Quartz Tariffs

 

Discover how you can green your life by building a knowledge base of current sustainable and eco-savvy trends. This series will delve into hot topics, current standards and practices, ways to design better spaces, and specify materials that benefit not only us, as consumers, but the world as a whole. Members of CaraGreen, a sustainable materials distributor, and other industry leaders weigh in throughout the series. This is Build Green, Live Green.
 


In this episode, we will cover recent tariffs on quartz and other building materials. How are these affecting us? We are here today with Jessica McNaughton and Kim Loftis of CaraGreen, our shows producer and sustainability think tank.


JESSICA: Hi, this is Jessica.

KIM: And this Kim.

JESSICA: We're here with our next episode of Build Green Live Green. I think this is episode five. 

KIM: Yeah! 

JESSICA: Okay. Cool. And today we're going to talk about the quartz industry. And people think, of quartz, they think of, you know, this kind of translucent or white rock, and that is quartz. But in the building environment, the term quartz is used a little bit differently-

KIM: Yeah, so quartz is basically a group of countertop materials. So it's become really popular right now. It's a material that a lot of people are very familiar with, and a lot of people have it in their homes, or at least see it in multiple commercial building spaces as well. A lot of people are actually replacing their granite and putting in quartz has kind of their upgrade or the newest material that's kind of out there. So it's definitely really popular and that's kind of what we're talking about when we're talking about it in this episode, is quartz as a countertop.

JESSICA: Okay, so I think another important thing as far as the market goes is I've seen even in my own neighborhood where a lot of people are doing home renovations, and they are doing exactly what you said, they're taking granite out, which has been the defect of standard for a while now, where every house you see listed says granite throughout and that had a lot of cache and that's kind of worn off in lieu of quartz, so of quartz, is kind of, the go-to countertop today. It's stain resistant-

KIM: It's fairly heat resistant.

JESSICA: Yeah. Okay. So let's talk a little bit about quartz and how it's made.

KIM: Sure.

JESSICA: The reason it's called quartz, is because it's quarried. The quartz itself is quarried, the quartz stone is quarried, and, you know, big giant blocks of it gets shipped to facilities where they're pulverized down to-

KIM: Yeah, so quartz is not like granite, where it's just a big rock.

JESSICA: Right.

KIM: It's a material that has other things added to it.

JESSICA: Right. So it's quartz and then resin, it can be 90% quartz, 10% resin, 93% quartz, 7% resin. But the reality is, it started out where there were big chunks of quartz in the resin. And then it's gotten to the point now where people are demanding a different aesthetic. And to get those aesthetics, they're grinding the quartz down to an absolute dust and then they can make anything they want out of it. They can introduce veining, they can introduce color, and so on.

KIM: So the options are basically endless, which I think is another thing that kind of made it rise to the top in some ways, is that people can pick exactly what they wanted, there are so many options. 

JESSICA: Yep. And it was actually invented in 1963 in Italy by Marcello Toncelli, who is one of the founders of Breton, who makes all the quartz equipment as well, but they were the first ones to introduce quartz to the market. So it's been around for, you know, 40-50 years, almost 60 years. But, you know, it's now in its current form. I think the most popular type of quartz you see is that super veined marble look-

KIM: Yes. White background, gray veining, that for sure-

JESSICA: So that's probably the most popular I would say. Certainly residential. You see it a lot commercially as well. 

KIM: And I think when you compare quartz to other countertop options, that example for the aesthetic that we just gave, the white with the gray veining, is a competitor to marble.

JESSICA: So you mentioned that quartz can look like marble, how does it compare to marble?

KIM: Well, as far as actual maintenance or performance of the product, quartz is very different because marbles is a very porous material, so it can stain easily, you don't have as high performance with that, but you have that beautiful look. So that's where also the white background with a gray veining came in because everybody loves that Carrara-marble look, but because the quartz has resin in it, that actually makes it more stain resistant, and, in some cases, compared to other products as well, more heat resistant so the performance is getting better. But now with the changes in the quartz industry, which we will talk about, there are some performance issues there.

JESSICA: So, quartz is kind of the leading material that is used today, it can mimic anything, you see quartz that looks like concrete, quartz that looks like granite, quartz that looks like marble. Alright, so let's look at the quartz landscape who the major players are, we know this well because we're kind of in this industry, but some of our listeners may not. So just kind of, for our listeners, we’ll give you a rough overview of what the major quartz brands are. In the US you've got Cambria, you've got Corian Quartz, which used to be called Zodiac, they now call themselves Corian Quartz, and we think we have a pretty good theory as to why that is. Other US-based companies are Wilsonart, is known mostly for their laminate but they do have a quartz line now-

KIM: They just recently added that somewhat, right?

JESSICA: Yeah, but they, like a lot of other quartz suppliers, are private labeling material from other countries. And we'll talk a little bit about that as we get further into this discussion. In Israel you have Caesar Stone, Italy, you've got Silestone by Cosentino, Santamargherita, Okite, some other big ones. Korea, you've got LG Hi-Macs. And also Hanstone. Hanstone is Hanwha, and they actually have a facility in Canada as well where they do a lot of production, there building a new one I think, Wilsonart and Hanstone are actually partnering. A facility down in Texas.

KIM: Oh. That's right.

JESSICA: That's super, super mega surfacing facility.

KIM: So those are the major players, kind of what we would say, as the brand names. And you mentioned it a little bit, but are they all making their own quartz?

JESSICA: No. So several of them aren't. And I don't want to air everyone's dirty laundry.

KIM: Sure.

JESSICA:  I’m sure we don't want to make any enemies here. I already have a couple of those. No, they don't, they privately, because the ability to make your own quartz is one thing, the cost of entry is quite high. But when the quartz patent expired and China was able to get access to the equipment to make quartz they started doing that, so giant, either the pulverized quartz or quartz blocks themselves for being sent over to China in their processed over there into slabs-

KIM: Where does most of the quartz actually come from, like where is the raw material being mined from?

JESSICA: There's quartz that comes out of Brazil, India, there is some in China, you know, a lot of different countries export it. Even some of the Eastern European countries it comes out off.

KIM: So another layer to all of this, is that it’s pretty darn energy intensive to mine this up from one country, ship it to another country. Add all this stuff, ship it all over again-

JESSICA:  The amount of silica dust in quartz is a major issue, it may be something we want to cover on another podcast. I'm not sure if it's of interest to the listeners. But, when they mine quartz, it introduces so much silica into the air that these miners and their families that live in these communities are breathing all this silica dust in.

KIM: Yeah.

JESSICA: And there's a disease called silicosis and it's from breathing all of this in, yet, you've got to have a lot of tight controls around the mining of that. And several companies do. But when you get into the commodities industry, like quartz is becoming, you've really got to make sure you're choosing the right suppliers.

KIM: Yeah.

JESSICA: So, we mentioned China, there are over 300 factories in China. And I don't know the exact number of private labeled names. But I know there's a single factory in China that does over a 100 private labeled names out of that one factory.

KIM: It's hard to even think that that's possible. That’s so many-

JESSICA: Yes. But all you have to do is go to one of these kitchen and bath shows, and the number of vendors there with the quartz brand, it’s crazy.

KIM: That’s true.

JESSICA: And if you ask them, do you own your factory? The answer is overwhelming no. Even brands that are US companies that sound like they have their own factories. If you dig a little bit, you'll find they're just sourcing slabs out of China and putting their name on them.

KIM: Right.

JESSICA: So that continued for a while. I remember having a conversation with a gentleman who said, if someone wants a brand name color of quartz, I'll take that sample and send it to my guy in China. And he knocks it off for me. So that started happening and Cambria got privy to it. What would you do if you found out that you know, someone was knocking off CaraGreen products and selling them under a separate brand?

KIM: Yeah, I mean, that would be very upsetting.

JESSICA: It is upsetting, and Cambria is upset, I think they took it the hardest because they have been manufacturing here, in the US, for quite some time. And now you've got people buying container loads, of quartz slabs, from China that mimics Cambria colors and they're doing their best to innovate and come up with these creative colors. But it's not enough to differentiate themselves-

KIM: Especially when the market is flooded with all these options. It's not like there's just one person out there knocking off a color here and there, like you said, there's these massive factories that make over hundreds of brands. And it's happening time after time after time. So, maybe the first couple times and kind of upsetting and you can innovate and maybe get around it a little bit, but after it happened that many times you're going to be really upset, so.

JESSICA:  Yep, and all you have to do is go into any countertop shop or kitchen and bath showroom that has countertop selections and you'll see 15-20 maybe 30 towers of different types of quartz and if you look from one to the other they're all very similar and every one of those is $8 a square foot and another one is $30 a square foot for material costs, say one installs for $45 a square foot and the other one installs for $70 a square foot and there's not that much of an aesthetic difference and the customer is not savvy to this came from a qualified us factory, and this came from China factory I don't know anything about, you know, the consumers are qualified enough to know. So I think that Cambria reached the point where they said we're going to do something about this and they filed a lawsuit in May, the lawsuit was for countervailing and anti-dumping so that basically means that they're asking that additional tariffs ,or duties, or taxes, if you will, be put on any quartz material coming from China into the US.

KIM: So their lawsuit was against quartz companies coming out of China as a whole.

JESSICA: Yes, so quartz material coming out of China as a whole I would say.

KIM: Got it.

JESSICA: So it's not- it includes full slabs that we are used to seeing, but also what some big builders will do is they'll partner with quartz manufacturer and say this is what my sink cut out looks like, here's where my facet holes are going to be, and they would just mass order these kitchen tops from these factories, so the tariff applies to that, as well.

KIM: So then the fabricators are getting cut out of that process-

JESSICA: Yes. So there's already a little bit of angst there and the fabricators, and for our listeners, fabricators are people that cut the stone into the countertop that you want, so when you go into Joe's Stonecutters, those are that's a fabricator, or Bill’s Kitchen and Bath, those are your fabricators. Anyhow, that leaves us with this lawsuit which was filed in May and then in June the preliminary ruling was that it valid. So that meant the tariffs were coming, so people had to start scrambling and that meant the fabricators and distributors had to start ordering now in order to get material in so they're not going to get whacked with a tariff or duty or whatever it ends up being.

KIM: So are those actually in place now?

JESSICA: Yeah, so in the middle of September, I believe it was, the amount of the countervailing duty was revealed. I should back up a little bit and talk about what countervailing versus anti-dumping means.

KIM: Okay.

JESSICA: Countervailing means Cambria is basically claiming that the Chinese government is unfairly subsidized in the factories This is not new to industry, this happened before with steel, it happened with sinks, it's happened semiconductors, so there's a bunch of industries because I used to work in semiconductors and I remember this exact thing, this whole anti-dumping thing. China was dumping its computer chips over here and companies were suffering, you can see the effects of that today, you know, companies like Texas Instruments, AMD, Nokia, people that were, you know, in the chip industry were really affected by that and that was 15 years ago. 

KIM: Absolutely.

JESSICA: So, this is not new to the industry, it's new to this industry.

KIM: Right.

JESSICA: So, I don't know that there's not a connection between the other tariffs that are happening and this lawsuit but the countervailing part of it means that the ITC has to go in and investigate, the International Trade Commission, go in and investigate and see if they can find evidence that these factories are being subsidized so the September ruling, and its comprehensive, shows that utilities, meaning the government's paying your utilities are giving you a reduced rate, the raw materials were being subsidized, which means, they were either being provided for free or at a very reduced rate, tax rates, you know, maybe being waved rent, you know, lease agreements. 

KIM: So what it would normally cost them to make these products, it was costing them way less because they're getting all these subsidies in one way or another.

JESSICA: Yes, exactly. So the tariff was assessed it was assessed at 34% for most factories. It was assessed at 178% for two factories.

KIM: Wow. Yeah.

JESSICA: And they were just found to be way more heavily subsidized.

KIM: Do we know if the factory that was found to be at 178%, how many quartz companies their supplying?

JESSICA: No, that was not in there. And that was not something that I read in there.

KIM: Okay.

JESSICA: But they know the material that's coming from those factories because they're able to assess the duties on it. So somehow, they know. So that's just the countervailing duty and its payable at customs to the agent. So think about your container comes into US Customs, there's an agent there, you have to pay them in cash or with a check on the spot. So, this is not included in your invoice.

KIM: Right.

JESSICA: This is not pay upfront, so I don't know how things are occurring between what's on the water now and coming into port and how people are handling that-

KIM: That's a good point. So basically the people that are buying the quartz from China they're the ones they're getting hit with these extra tariffs. 

JESSICA: Yes. If I'm an importer of quartz, I'm the one going to customs, at the port and writing that check. And as I said, that's just the countervailing ruling they haven't ruled on the anti-dumping. And what anti-dumping is, those tariffs- those would be assessed if they can prove that the Chinese companies were selling quartz here in the US for less than it cost them to make it, which is hard to figure out because you've already said you're being so heavily subsidized. So what does it cost you to make it and how do I know you're selling it for less, it almost goes hand in hand, so it seems hard to me to be able to assess countervailing without finding anti-dumping.

KIM: Yeah, I mean, it almost seems like the countervailing proves the dumping part of it. 

JESSICA: Yes, exactly. So Cambria's claim is, there's no way it cost them this little to make this material because we buy the same raw materials, you can normalize for labor costs, they may have slightly lower labor costs, but they can do the math and say, this is what it should cost, this is what they're selling at.

KIM: Obviously, they did their homework before filing the lawsuit.

JESSICA: Yes. So everyone in the industry is expecting the anti-dumping portion will also come through, and that will be on top of the 34% to 178% that I mentioned earlier. 

KIM: And then what about the other tariffs that we're hearing about right now, I'm sure our listeners, or at least some of them, are privy to what's going on with the Trump administration and tariffs that they're now putting in place.

JESSICA: Yeah, so at the expense of getting political, Trump has decided to basically start a trade war with China by assessing these tariffs. And the initial tariffs are 10% on building materials. And it's not just building materials, its 250 billion dollars’ worth of goods that these tariffs are being assessed on, as it applies to quartz. That's an additional 10% tariff. That’s kind of the building material tariff is 10%, steel, a lot of different materials.

KIM: I think most of us have heard about the tariff on steel. So it's similar. It's kind of in that category. And that will be applied on top of these quartz tariffs that we're talking about.

JESSICA: Yep, so it's supplemental to them. And it's going up to 25% at the end of the year.

KIM: Wow.

JESSICA: So, what I don't know, I believe that the tariffs are additive. It's not like they're being multiplied on top of each other. They're additive. So 34%, you pay here, 10% you pay here. And then when the anti-dumping comes through, that'll be added to it, but you're looking at potentially 50 to 100% increase in the cost of goods and these quartz materials.

KIM: Absolutely. And the point of Trump's tariffs, from his perspective, are to get people to spend, and buy US good instead of goods from China.

JESSICA: Right, that's what we want them to do. We want them buying IceStone and PaperStone, you know, that's our whole game. But yeah, and we're actually aligned with Trump on that.

KIM: Yeah, exactly.

JESSICA: We want people buying, we want people buying US made products. And I think that's great. But is buying though CaraGreen the better solution than tariffs? Yes. But not everyone can do that. So at a government level, the intent of the tariffs, yes, is to make people buy local. Unfortunately, the outcome may not be that straightforward. So, we buy a lot of stuff from China.

KIM: So much stuff.

JESSICA: You might be ordering it from usaproducts.com, but it's coming from China. And I think if you look at your Amazon shopping list, go look the last 12 things you ordered. Unfortunately, you know, unless you're an Etsy shopper, most of the goods that we buy come from China, so it's going to hurt right away, because everything that we buy, you know, from toys for kids to vegetable juice-

KIM: -cosmetics-

JESSICA: -that's all being taxed at this additional 10%. So, we're going to start to feel that, and do you think China's going to sit back?

KIM: Probably not.

JESSICA: So they just recently assessed 60 billion tariffs on our US goods. So, while the intent is to get more people to buy local and to stimulate more manufacturing here in the US, their retaliation with these $60 billion in tariffs has the opposite effect, right? There are cars, you know, our agricultural goods are all being taxed at this higher amount. And it's really hurting those industries now.

KIM: Yeah.

JESSICA: So, let's get back to quartz. So, the intent of the lawsuit, I think, for Cambria was to keep these low-ballers, for lack of a better term, out of the market. And to stimulate demand or get the demand back for their products. What was interesting to me were the letters that went out from the manufacturers after the tariffs hit, I saw letters from I got a couple, but I saw letters from Silestone, Hanstone and a couple others that were, “hey guys, there's this tariff, but our prices aren't going up. And by the way, we have a factory and in Canada, or -“

KIM: Smart for them to remind people that they're here-

JESSICA: Yes. And so, I think well, Cambria was hoping to capitalize, the first movers honestly were, you know, Silestone and Hanstone and some of the others, even IceStone, I think, has a letter going out about how they're made in the USA. And they're actually taking-

KIM: Recycled content also-

JESSICA: So our last blog was on recycled content. Our third one was on recycling and how we need to recycle more of our waste. IceStone's letter was more positioning, “hey, this is happening with quartz. And there's all this glass that we're taking out the waste stream, choose Istone we are made in Brooklyn.” So now we're in this situation where I've talked to a lot of fabricators and to remind our listeners, these are the people that actually cut your kitchen into the shapes you need and lay it out, and install it-

KIM: They're buying these materials-

JESSICA: Right. So the fabricators are buying these quartz materials, they are not happy with Cambria, a lot of them are upset that they were, you know, they may have bid jobs at the price they thought they were going to get their quartz at and now that it's much higher. So, they're in a quandary where they may have to eat it because the owner of a building is not going to say, “okay, you can double your bid. I heard about the lawsuit.” It just doesn't happen like that.

KIM: Yeah, yeah. So they had a lot of options that were really low-cost options. And now that's not available anymore. So they're upset about that, because they're used to customers having options when it comes to price point. And now that's really not available. Well, I guess I should say it is available. But soon enough, they're going to be big enough changes with all these tariffs being put in place when they have to pay for that when it actually comes to shore, that those options are not going to be as readily available.

JESSICA: And I think another thing that we should know or talk about is, you know, if I'm a quartz supplier or an importer, I'm not just going to sit back and say, “well, thanks a lot, Cambria. Now I have to pay these tariffs” or “thanks a lot, US government, now I have to pay these tariffs.” I'm going to go somewhere else. You want to have a trade war with China? I'm going to go over here to Vietnam, Thailand.

KIM: Yeah.

JESSICA: And I'm going to get my quartz from them. 

KIM: So that companies are just moving around.

JESSICA: Yeah, yeah, and getting materials from Thailand and Vietnam is not- these aren't some third world countries, I mean these guys have state of the art production in a lot of cases. Textiles were made in China for the longest time are now being made in Vietnam and Thailand. Because it's lower cost because China's labor rates have risen, but they can get quartz there, too. So most of them switch suppliers. So the fabricators aren’t going to be really that affected by it.

KIM: Do they have a big enough scale, and there other countries that have factories that were as big as the one in China?

JESSICA: They're not going to be as big, they don't have as much area to do that.

KIM: Right, yeah.

JESSICA: And they don't have the labor force to the scale that China does. But they're a nice option. And they're not in a trade war. But that's not to say that if I'm Cambria, or anyone else, I couldn't go in and say, “hey, these guys just moved this from China over here. And by the way, they're selling it at the same price. So if you ruled that they were being subsidized here, it must be being subsidized here” or there's some other market dynamic that will allow them to sell it so cheap.

KIM: Yeah, it won't end there. 

JESSICA: Yeah. So, I think the key takeaway here is that everyone's buying quartz countertops, but you really should know the backstory, that it’s become so massively commoditized, it's being dumped into the US market at less than it's worth, and I should qualify this whole conversation by saying, there are some very reputable Chinese manufacturers out there.

KIM: Sure.

JESSICA: And they make high-quality product, their production facilities are state of the art in the rival any that we have over here. It's just that with commoditization, it makes it very hard for the true leaders to stand out. And they got caught up in these things. And they can't avoid being caught up in this trade war. But you know, it's a really ubiquitous material now, everybody's got it. It's not a real differentiator. So, I personally think that it opens the door for the made in the USA materials that we talked about. 

KIM: Absolutely. Yes, we've mentioned IceStone, we mentioned PaperStone, and there are many other products that CaraGreen sells and that other distributors sell, as well, that are made in the USA and have that recycled content. So you kind of get the best of both worlds with products like that when you're considering how to make the best impact and the best choices. 

JESSICA: Yes, so, you know, we talked about IceStone, has recycled glass, Paperstone has recycled paper. We covered that in our recycling podcast, which can find on our website. Care Green. com. I think it's also a great entre for materials like sintered stones.

KIM: Absolutely, yeah, something new to come into the market-

JESSICA: -that outperforms quartz and isn't going to get commoditized. And the same guy that invented quartz in 1963 invented sintered stone, invented Lapitec.

KIM: And Lapitec is one of those products that, not only is it kind of addressing some of the downsides or some of the things that quartz just isn't able to do, but they're making their product better in other ways, like their Bio-Care technology that can actually clean the air when it's used on the exterior of the building as cladding. So it's just, you know, multiple steps above the previous material, which is quartz. So it's really great to see companies innovating like that, and going to the next level, which is another reason why we're trying to educate the consumer and make sure that people really know the full picture about what the options are out there.

JESSICA: Right. Because we don't want to say, hey, quartz got commoditized and you want to in your kitchen. Too bad. It’s still a good material if you do your homework. But if you really do want something different look at some of those made in the USA materials, sintered stones, it's really the next big thing coming to market. So there is an alternative to quartz that gives you even better performance. They don't have to compromise with that. But yeah, so this is an evolving situation. We may have to do a follow up on this-

KIM: I'm sure we will. 

JESSICA: -as this kind of saga continues. Yeah. It's been fun to talk about. 

KIM: Yes, I hope everybody learned something new. I'm sure that they learned multiple things. So-

JESSICA: I hope so. All right. Well, thank you. This is Jessica and Kim with Build Green Live Green. Thanks for listening.
 

For a written manuscript of this episode as well as supporting resources, Visit our website at www.caragreen.com/podcast. Want to know more about a specific industry related topic? Shoot us an email at social@caragreen.com.