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The impact of the ongoing West Asia crisis is beginning to reflect across industries, with home decor products such as ceramic tiles becoming more expensive due to rising gas costs, according to a report by Nuvama Institutional Equities.
The report noted that disruptions in gas and propane supplies from Qatar have significantly affected tile manufacturers, squeezing their margins and increasing production costs. According to the report, most manufacturers have already implemented a price hike of around 5 per cent on existing inventory. It stated "Most manufacturers have implemented a apprx. 5 per cent price hike on existing inventory, with a further 10-20 per cent increase under consideration amid volatile gas prices". The report highlighted that the current situation has also led to panic buying by distributors, who are building inventory to meet near-term project requirements. However, the report cautioned that if the gas shortage persists for more than a month, it could lead to supply shortages and impact volumes in the first quarter. Ceramic tiles are becoming more expensive because natural gas is the primary fuel used to power the high-heat kilns required for production, and its cost is a major component of the final price. Despite this, the report expects that since the disruption is affecting the entire industry, companies may be able to recover in the following quarter as demand normalises and supply stabilises. The report further noted that the Indian ceramic industry is currently undergoing a structural clean-up phase. However, near-term headwinds such as the ongoing gas crisis and slowdown in exports are weighing on overall sentiment. It also pointed out that around 25 per cent of exports from the ceramic industry are linked to the Middle East, which has been affected due to the ongoing conflict. It added "given that it will be an industry wide event, we expect the following quarter to catch up". So, the report indicated that rising energy costs and supply disruptions are creating short-term challenges for the ceramic tile industry, leading to higher prices and potential supply constraints in the near term. (ANI)
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