“I found Rome a city of bricks and left it a city of marble.”
Such was the boast of Augustus, the famed Roman emperor. But two thousand years on and marble still resonates with imperious types, as China’s property owners click their heels on the polished floors of their latest condominiums.
A bet on this trend continuing helped launch the recent initial public offering of Sichuan-based Kingstone Mining, the first marble miner to list in Hong Kong.
Kingstone only started operations last September but it was still able to raise $167 million. Its cornerstone backers are real estate companies and it claims to have the largest beige marble mine in China.
The 21CN Business Herald estimates that China’s stone industry is worth around $46 billion annually, up almost 10 times since 2000.
For all that growth, the industry is still relatively immature. “China’s demand for stone is huge,” explains the newspaper, “[but] the harsh reality is that domestically-produced stone is poor in quality and low in price.”
That means imports are climbing: up more than 55% for the first eleven months of last year, costing builders nearly $2 billion.
Why doesn’t domestic marble command a better reputation? Tan Jinhua, secretary general of the China Stone Association, explained to 21CN that the underlying quality is often fine, but that the mining and processing is often of lower standard.
“The overwhelming majority of domestic stone companies are small scale, low-tech and still using out of date processing machinery,” explains 21CN, “so it’s difficult to guarantee the quality.”
The result is that Chinese builders have been paying a multiple on local prices to import marble from places like Spain and Iran. While $280 might be paid for a square metre of high-quality Iranian marble, the best Chinese equivalent can only fetch around $120.
Bridging that gap is the opportunity that Kingstone and others are trying to exploit. The firm only averaged about $84 a square metre in sales price in the months leading up to its listing. But it says that it could demand something much closer to the international price if it manages to introduce modern processing methods.
China’s marble consumption has doubled between 2005 and 2009, according to building materials portal bmlink.com, at a slightly faster rate than the growth in domestically produced marble slabs. And the ‘beige’ coloured marble that Kingstone is mining is among the most sought-after. Chinese reserves are relatively low (more than half the beige marble consumed last year was imported).
Building construction accounts for about half of marble demand. Sculpture (including tombstones) makes up 30%, leaving furniture and other industries with the remaining 20%, according to the China Stone Industry Association.
Local governments are a key customer of miners like Kingstone.
“We expect a large part of sales volume of our marble slabs will be made to contractors on publicly funded construction projects,” the company prospectus explained last month.
The risk, of course, is that real estate prices head south, and that tightened controls on local government spending also begin to bite. Marble demand would likely mellow as a result.
“We are affected by the level of demand in the real estate development industry,” warns Kingstone, “which may experience a significant downturn.”
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