Exports

Report Nº 30/2007 of the Abirochas Brazilian Association of Ornamental Stone Industry states that during the previously mentioned period, Brazilian exports reached the figure of 823.57 million dollars, and 1,901,960 tonnes of stone products were marketed. Compared to the same period in 2006, it showed an increase of 5.35% in value and -1.75% in quantity.

The main export products continue to be polished granite slabs, unprocessed granite blocks and slabs, slate tiles and slabs, foliated quartzite slabs (a type of São Tom?? stone material) and pieces of soapstone (ovens, fireplaces, etc.). The most significant variations in turnover were found in slate, foliated quartzite and soapstone products, which were less dependent on the US market. Consequently, the percentage of these products in the total number of Brazilian stone exports increased. It is estimated that by the end of 2007, these products will have reached a figure of 9%, 4% and 2%, respectively. (s_tonebuy)

Imports

The growth rates of Brazilian ornamental stone imports, both in value and quantity, continue to be higher than the exports. From January to September 2007, imports totalled 30.23 million dollars and 56,669 tonnes, which represented an increase of 42.0% and 23.45% respectively with regard to the same period of 2006. The polished marble slabs and other limestone rocks (travertines, limestones, onyx) totalled 73.6% of imports. The main countries of origin are Spain, Italy and Greece, with a more limited participation of Turkey, China, Egypt and others.

Conclusions

Brazilian and natural stone exports still face substantial adverse conditions in 2007, conditions that are very much linked to both the residential real estate market in the US, and to the appreciation of the Real against the dollar, which in turn resulted in a drop in sales and substantially reduced the profitability of the exported products.

In the first fortnight of October, the exchange rate for the dollar dropped to below 1.80 Reals, the lowest figure since the middle of 2000.  If we consider that around 3-4 years ago, Brazilian exports had received 3.50 reals per exported dollar, we now have a 49% loss of income in the same products marketed today. The damage is not limited to the loss of income, but one must also add the increases in production costs in Reals, which corresponds to the accumulated inflation rates, a total of almost 85% over the 2000-2007 period.

The result of these losses is much higher than the price rise which exporters gained since 2005. For instance, in the case of polished granite, which makes up 65% of the Brazilian stone export value, the rise was 33.7%, rising from an average price of 602 dollars/tonne in 2004, to almost 805 dollars/tonne in 2007. [stone_buy]

Considering the equivalence of the exchange rate from October 2007 to August 2000, and also as a way of showing the loss of profit from exports in the stone industry, one can see that the average price of granite slabs was of 1,300 Reals/tonne (722 dollars/tonne) in 2000 and 1,450 Reals/tonne (805 dollars/tonne) in 2007. The average sales price variation in these slabs, in Reals, was therefore + 11.5% in the period between 2000 and 2007, against an accumulated inflation (see the increase in production costs) of approximately 85% over the same period.

As for the performance of the US real estate market and its effects, it is worth mentioning that the start of the building of new housing dropped by 10.2% in September, reaching an annualised rate of 1.191 million units, which is the lowest figure in the last 14 years. Furthermore, the issuing of licences for new constructions dropped by 7.3% in September, to an annualised level of 1.226 million and also represents the most significant fall since January 1995. (stone-buy)

According to the opinions of economic analysts and federal authorities, the real estate market crisis keeps growing and represents the most serious problem for the United States economy, and will last at least until the middle of 2008.  The situation in the real estate sector upholds the arguments in favour of continuing with the recent reduction in interest rates to prevent a slowdown in the country's economy. This situation also justifies the injection of resources into the real estate system by large banking institutions, with an aim to reducing the number of mortgage foreclosures and the loss of property by borrowers.

Therefore, according to the previous reports by Abirochas, 2007 should encompass a transition phase and certain changes in the stone industry. This transition relates a change from a period of considerable growth in world demand, existing between 2002 and 2006 and essentially driven by China and the United States, to a less dynamic period in the next five years, when competition on the international market will no doubt be more tenacious.