Impact of anti-dumping investigation of ceramic imports to GCC on ceramic manufacturers
Saudi Ceramic Company (SCC) has announced that the Permanent Committee to Combat Harmful Practices in International Trade of the General Secretariat of the Gulf Cooperation Council (GCC) has started an anti-dumping investigation against imports of ceramics and porcelain products of Indian, Chinese and Spanish origin to the GCC. It added that this came after the Office of the Technical Secretariat had received a counter-dumping complaint supported by SCC and a number of other Saudi and Gulf-based ceramic companies. SCC also confirmed that the Committee is considering imposing temporary anti-dumping duties as soon as possible to address the substantial damage that hit the Saudi and Gulf ceramics industry, until it imposes final anti-dumping duties on imports of ceramic products and porcelain tiles from India, China and Spain to the GCC.
How big is the size of imports: Saudi Arabia is the 7th largest ceramic-consuming country, with c248mn sqm of annual demand, according to Ceramic World Reviews 2016 data. Although we assume consumption to be at least 10-15% lower over the period, due to current economic weakness, the majority of demand is met by imports (c50% of demand) from regional and international countries. However, due to severe competition in the local markets of major exporting countries, in addition to favourable forex movement, ceramic imports have increased significantly, affecting local prices severely (almost 25% decline in prices over the past five years) across the GCC.
Who will benefit from anti-dumping duty/measures: Although it is still unclear how the investigation would conclude, if the committee finds any dumping or predatory pricing by these countries, it would lead to the implementation of anti-dumping duty, or measures like minimum landing prices for the tiles. We see two possibly positive outcomes from this: 1) it could boost pricing, as it would increase the import parity price; 2) it could help local producers grab more market share, if it made imports not feasible for some foreign producers. Companies that are more reliant on regional markets such as SCC, Al Anwar Ceramic (Oman) and, to an extent, RAK Ceramics would be the main beneficiaries of such measures, in our view.
From EFG HEFG Hermes One