HomeNewsMorbi tile exporters divert their production to domestic market

Morbi tile exporters divert their production to domestic market

Non-availability of containers (for exports) and prevailing high freight rates are affecting export of tiles from India to other countries which in turn is forcing the tile manufacturers to divert the production to domestic market to tide over the situation. The industry is now fearing that the continued diversion of production meant for exports to domestic market may bring down the prices in the local markets.

Current situation may affect many domestic manufacturers as they won’t be able to pass on the cost inflation to the consumers through price hikes. Though demand in the domestic market is increasing at a steady rate supply from Morbi has increased as the export-oriented players have increased supply in the domestic market to liquidate their inventory. Normally, 30-40% of Morbi’s tile production is meant for exports market.

Though the availability of containers has improved in last few months, exporters are faced with the rising freight costs which have increased from US $7,000-8,000/container to US$15,000/container.

Anti-dumping duty by Europe, Taiwan and GCC in recent months have only compounded the problem of exporters. However, the impact of anti-dumping duty in Europe is expected to be only to the extent of 8-10%.

The Morbi manufacturers expect the international container shortage problem to normalize by February 2022. Post that, exports are expected to pick up from the current level of Rs 120-150bn/annually to Rs 200bn annually.

Spike in natural gas price is another problem faced by the industry. In fact, manufacturers in Morbi have witnessed higher input costs (an increase of 10-15% QoQ) on the back of higher gas prices, raw material, freight and labor costs.

However, the end users of tiles may not be benefited by the diversion of production to domestic market as the dealers are taking advantage of the situation by asking for deep discount from the Morbi manufacturers. Also, Morbi manufacturers have started cutting down production and this condition may continue till the situation improves. Also, nearly 30% of the units operating in Morbi have temporarily stopped production.

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