HomeIndustry TrendsTiles manufacturers expect early recovery in demand

Tiles manufacturers expect early recovery in demand

It’s generally believed that lockdown 2.0 is not as harsh as the one seen last year and it may not last longer also. Despite this most of the industries including tiles industry have seen their revenue falling sharply in the first two months which was the case last year too. On the positive side, most of the states are already talking of relaxing the lockdown norms which is a positive sign for the industry as well as for the people.

Situation better than last year

But the tiles manufacturers in general say that the condition is still better this year as the situation has not come to a standstill this year and construction activities were going on though on a lower scale. Also, real estate sector is on a much better condition this time (thanks to various incentives given by the government) than last year. Further, last year’s post lockdown experience gives a reason for optimism for the industry in general and for tiles manufacturers in particular.

Capacity additions

Mad rush to add capacity which was seen a couple of years ago which in turn led to excess capacity, price crash and closure of some units is being repeated once again. About 50 new units are under construction at Aniyari which is 14km away from Morbi, while 100 existing units are doubling capacity.

However, the industry is not too disturbed by this development as the manufacturers in Morbi continue to focus on strong exports, thereby keeping the domestic market open for other players. Morbi manufacturers have become very selective while supplying to domestic market and supply only to dealers with favourable payment terms. Therefore, despite the likely new capacity additions in vitrified floor tiles, the experts do not expect supply pressure in the domestic market beyond two months as these tiles are fast replacing China in exports market and as such the products from increased capacity may not find their way to domestic market. Even in domestic market, Chinese tiles are being replaced by the ones manufactured locally.

Price increase

In January-February this year, Morbi manufacturers have increased prices of tiles by Rs 10–20 per box. Though the organised players were keen to increase prices, year end pressure to achieve volume target deterred them from doing so. So, the organised players (including Kajaria and Somany) increased prices only in the vitrified tiles segment by Rs 10 per sq meter. During the month branded players may announce price increase in other segments too which may be absorbed by the market due to strong demand outlook.

Unorganised sector is in bad condition

Smaller players and the unorganised sector are finding the going tougher due to various reasons. Compared to larger players, smaller players are unable to provide all sizes, availability with them is a challenge; they have limited designs. Steep rise in raw material prices and liquidity crisis have further added to the misery of small players. This has resulted in demand shifting slowly to branded players who are seeing market share gains in recent months.

Weak project sales

Though the real estate sector is in a much better condition than it was in during the first quarter of 2020, its only the leading players who are reaping the benefits of better demand while small and marginal players are still struggling. As such most of the tile manufacturers are wary of supplying to these small and marginal players fearing payment defaults. They are mostly depending upon the retail sales for their growth. Meanwhile, demand from government agencies is now improving.

Industry has seen most of the demand from new homes and negligible demand from renovation. However, renovation demand cannot be postponed indefinitely and once the normalcy returns (may be after vaccination) renovation demand too may return which may further push up the industry’s growth rate.

Presently, the dealers, mainly larger ones, have started stocking up as they expect a pent-up demand once the lockdown norms are relaxed. However, the possible third wave and its intensity and any delay in relaxing the present lockdown may puncture the recovery process. However, chances of that happening seem to be remote.

Subscribe to our newsletter

To be updated with all the latest news from Sawdust


Please enter your comment!
Please enter your name here




latest news