If the proposed move by the Gulf Cooperation Council (GCC) comes true, tiles manufacturers in Morbi will be in for another shocker after facing a series of setbacks in last few months. According to the recent reports, GCC investigating authority has suggested differential anti-dumping duty on imports of ceramic tiles from China, India and Spain. With most Morbi exporters falling under 42.9% ADD criteria vs 23.5% for China, Morbi could lose out on competition to China in Gulf region. New duty structure is likely to come into effect from 1st December, 2019. GCC had started an anti-dumping investigation against imports of ceramic products of India, China and Spain in the first week of November 2018.
GCC is a political and economic union of all Arab states except Iraq and its member countries including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates (UAE). The Technical Secretariat of GCC had received various complaints from Saudi and Gulf based ceramic companies as they are facing severe pricing pressure (almost 25% decline in prices over the last five years) and market share loss due to cheaper imports.
Morbi has been exporting to 150 countries including Italy, Mexico, Brazil and Turkey. The cluster produces wall tiles, floor tiles, vitrified tiles, polished tiles, twin charged tiles, sanitary wares, industrial ceramics and technical ceramic products. However, exports to GCC are largely confined to GVT and ceramic wall tiles. Meanwhile, ceramic tile exports from Morbi are estimated to have touched Rs4100 crore over April-August 2019 vs Rs2800 crore achieved in the corresponding period of last year – representing a growth of 48%.
According to Morbi players, such massive anti-dumping duty will lead to vast production cuts in 400 manufacturing units putting 75,000 jobs under threat as Morbi ceramic industry generates direct and indirect business to raw material suppliers, machine equipment suppliers, logistics companies, power sector, gas companies and various other ancillary industries.
Further, GVT price in the domestic market, which is already under stress due to recent capacity additions by Kajaria and Somany in South India, is likely to get further impacted by incremental supplies from Morbi units (which were hitherto dedicated to exports to GCC). Further, there is likelihood of 7-8 large units coming on stream in near term which is expected to put pricing of ceramic wall tiles under pressure as well.
Morbi tiles industry is already reeling under recent NGT ban on coal gasifiers leading to higher cost of production and severe demand slowdown and liquidity crunch. Also, increase in compliance levels due to introduction of GST and recent imposition of penalty on non-adherence of coal gasifier guidelines are other issues which the industry is currently dealing with.