Tiles makers under pressure as demand slackens

Monsoon season coupled with a slowdown in realty sector seems to have brought down the tiles demand in the country by about 20 per cent over last year. What's more, the industry faces pressure on margins as raw material and fuel costs have shown sharp increase over last year.

Even as the construction activity remains sluggish during monsoon season, a higher interest rate regime has affected tiles demand from commercial as well as housing sector.

According to industry insiders the slackened demand in the domestic market and high input cost has prompted them to either downsize their output or lose on profitability.

"The domestic demand has dipped by about 20 per cent for the all types of tiles. This is partly due to the monsoon season, but the credit crunch due to high interest rates has also become a major factor affecting demand for tiles," said Hasmukh Patel, managing director, Asian Granito India Limited.

The cost of key raw material for ceramic tiles, fluorspar mineral has gone up from around Rs 1,100 per tonne to Rs 2,000 per tonne in past five months. More over, the fuel cost has also seen sharp increase.

Gas prices have jumped from Rs 13.5 per cubic meter last year to Rs 22 per cubic meter now, industry sources informed.

"The input cost is hurting our profitability. Additionally, the demand is also slack due to various factors including monsoon. Demand from South India was a major driver for the industry in Morbi, but that too has been affected due to slackness in the realty sector. There are bleak prospects for improvement in near future," said Shekhar Adroja of Metro City Tiles in Morbi.

Some of the tiles makers have also started looking at overseas market for better sales. "Chinese tiles makers have reduced their production of wall and floor tiles, so we stand better chance in the overseas market. Especially, when domestic demand is shrinking," said a tiles trader in Morbi. But the pricing still remains a concern for most of the units to sell in the international market.

Morbi and Dhuva region in Saurashtra houses about 400 tiles making units with nearly 70 per cent share in the India's total tiles production. The industry produces around one million square meters of tiles every day with an annual turnover in the range of Rs 8,000 to Rs 10,000 crore.