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Resilient: Demand fuels manufacturing output at home

October 15/22, 2018: Volume 34, Issue 9

By Lindsay Baillie

 

It seems, as of late, most eyes are on resilient flooring. This comes as no surprise, especially when considering the category’s red-hot products from the past five years. However, resilient flooring is now receiving extra attention as a result of the newly imposed Chinese tariffs. While manufacturers who import products are working through the current 10% tariff—and preparing for the potential 25% tariff at the start of 2019—those who manufacture domestically are considering ways to boost their current capacities.

Regardless of the tariff’s influence, many flooring manufacturers see domestic production of resilient flooring on the rise in 2018—a continuation of a trend seen in 2017 when domestic production increased 1.4% from 30.2% the previous year. One driver of this increase is the growth of LVT, observers say.

To keep up with the demand, manufacturers are making significant investments in their domestic facilities. Case in point is Mannington, which has more than doubled the size of its LVT plant over the last six years and has tripled the output, according Jimmy Tuley, vice president, residential resilient. “I think there’s continued investment because the category is growing and there are a lot of benefits to domestic manufacturing. Also, there’s still a big gap in the amount of capacity that’s here vs. what’s in Asia and Europe.”

Armstrong Flooring, a company that has manufactured the bulk of its flooring products in the U.S. for more than 100 years, sees the benefits of domestic production as a main driver of growth. “Manufacturing in North America typically gives us improved lead times and the ability to more rapidly integrate customer feedback into the product design and development cycle,” said Jamey Block, vice president, product management, resilient.

For Kurt Denman, chief marketing officer and executive vice president, sales, Congoleum, the increase in domestic production can be attributed to both its overall benefits as well as a strong economy. “There are market segments that are simply better served by domestically produced goods. Domestic manufacturing allows for more direct control, responsiveness to market demands and shorter lead times.”

Other industry observers see the tariffs on Chinese imports as a potential driver. “We see a steady increase in demand on our domestically produced resilient and expect this trend to continue with the uncertainty over import tariffs,” said Michael Finelli, director, Beauflor.

Tariff talk
The newly imposed tariffs on Chinese imports have the potential to effect domestic sales of resilient flooring. However, many manufacturers believe it is too early to determine the precise outcomes. “The imposed tariffs, if they remain in effect, will likely have a gradual and positive impact on domestic production over time,” Congoleum’s Denman said. “In the short-term, domestic production will likely see an increase where existing capabilities and capacity are aligned with the market needs.”

Denman added that the long-term impact is less clear, specifically because businesses often thrive when influencing factors are consistent. “Tariffs can be imposed or reversed with relative ease and speed. Adding domestic manufacturing capacity is expensive—which, if the tariffs remain in place, may be a good strategic initiative. However, if there is a reversal, a company that has invested in domestic capacity can find themselves with excess capacity and an overhead structure that is not competitive.”

Others, such as Adrienne Roseman, director of LVT, Tarkett, predict the promotion of domestically manufactured goods will significantly increase over the next several months. “The duration of the tariff will steer the amount of domestic manufacturing that comes online in the coming year. LVT manufacturers will have to closely consider new launches to ensure we can bring value to our customers.”

While the tariffs could spark an increase of investment in domestic production, manufacturers say initial investments started long before there were talks of tariffs. “Investment in domestic capacity has been well under way for the past five to seven years,” said David Sheehan, senior vice president, product management, Mohawk resilient. “Most of the traditional resilient players have all made investments in their facilities to increase capacity. There has also been investment from both Europe and, most recently, Asia to expand U.S. capacity.”

In fact, even though this investment is expected to increase, observers expect the bulk of it to come from manufacturers who already have hands in U.S. soil. One main reason for this: the cost of admission. “There is a large barrier to entry for any of the resilient manufacturing facilities,” Mannington’s Tuley said. “It’s a challenge for people who aren’t experienced manufacturers to do that.”

In addition to the literal cost of creating a new facility, the time it will take to build poses another obstacle for manufacturers looking to break ground. “Our state-of-the-art plant took three years to bring from idea to realization,” Beauflor’s Finelli said. “These shifts do not happen quickly.”

Facility updates
While it might take some time for importers to construct new domestic facilities, U.S. manufacturers are continuing to expand and diversify. For instance, Shaw Industries, which provides both domestically manufactured and internationally sourced products, has invested in the U.S. in a big way. “We are building on our $130 million investment to create domestic LVT manufacturing at Plant RP in Ringgold, Ga., by adding additional product and innovation capability,” said Tim Baucom, executive vice president - residential business. “Regardless of where our LVT is manufactured, we will uphold our current standard of excellence, which consistently outperforms our customers’ expectations.”

Armstrong produces 100% of its residential vinyl sheet products in the U.S. It’s Lancaster, Pa., plant focuses on mainly fiberglass-backed products, while its Stillwater, Okla., facility handles predominately felt-backed products as well as the company’s proprietary limestone-encapsulated felt product, StrataMax.

“We have invested millions of dollars in the domestic production of LVT to produce resilient flooring in a cost-effective manner, improve styling and be more responsive in servicing key market segments,” Block said.

Mannington is increasing its domestic capacity via the expansion of its LVT plant as well as the development of a new cutting building. “We’ve only had our new cutting building for north of a year,” Tuley told FCNews. “We’ll expand over the next nine months to a year, and this is absolutely a place we’ll continue to invest in.”

Meanwhile, Tarkett is also taking advantage of its domestic space. The company kicked off a three-year investment period back in January to increase production capacity at two facilities in Florence, Ala. “This expansion addresses significant demand for Tarkett’s vinyl modular flooring,” Roseman said.

Mohawk/IVC, which has more than 1 million square feet of production space, continues to expand its capabilities. Sheehan predicts it will soon be the first fully integrated North American producer of rigid products.

Over the past two years, Congoleum has invested millions of dollars into its Trenton, Pa., plant. According to Denman, this investment paved the way for the launch of Cleo Home. “[Cleo’s] eco-forward construction is 85% locally sourced limestone and is produced entirely in the U.S. This type of market-leading innovation simply isn’t possible using offshore manufacturing.”