India: Vitrified Tile Expansion Cause Overcapacity
The huge increase in Morbi in the number of new units manufacturing vitrified tiles has left India's largest ceramic industry cluster has saddled with excess production of such tiles. Overproduction of vitrified tiles has put tile-makers in the area under pressure to keep prices low.
In the past ten years, around 133 new vitrified tile manufacturing facilities have become operational in Morbi. The production has capacity risen from 4 lakh boxes per day to 18 lakh boxes a day, thus creating greater supply than demand.
“Two years back, there were 77 units making vitrified tiles. Today, their number has jumped to 210,” said KG Kundariya, president, Morbi Ceramic Association. The excess capacity and production has put pressure on prices which have already come down by 10%.
“Although the demand for vitrified tiles have improved, overproduction is taking a toll on prices,” said a ceramic tile maker from Morbi. “The production capacity has surged 4.5-fold in two years while the annual growth in demand is 20%. This means, the excess capacity will take at least five years to be fully absorbed.”
According to Kundariya, with increased supply and prices going down vitrified tile producers are either cutting down their production or keeping their units shut for some time to stay afloat amid
Three years ago, wall tile segment had faced a similar problem when the number of units spiked from 200 to 350. Now, a similar trend is being witnessed in vitrified tiles.
Tile-makers attribute lack of diversification to sudden jump in production capacity. “Most of the new units have been establish by the entrepreneurs from Morbi. They do not diversify into other sectors or products and tend to pump in their profits only in the ceramic industry. This has led to the problem of excess capacity"
However, he also made it clear that no new vitrified tile-making units are in pipeline. "New units are unlikely to come up in the next few years. First, the current has to be fully utilized,” the association president said.