Redirected volumes from Morbi to create pricing pressure in the Indian market
The Gulf Cooperation Council (GCC) has announced the imposition of anti-dumping duty on imports of ceramic floor and wall tiles originating from India. The average duty imposition will be 41.2%, and the levy will come into effect from 06.06.2020. This announcement has come after GCC completed its nearly 16-month long investigation into charges of dumping by Indian, Chinese and Spanish tile exporters. GCC is the intergovernmental union of the Arab states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE).
According to the notification issued by GCC-Bureau of Technical Secretariat for Anti Injurious Practices in International Trade on April 30, three Indian companies which co-operated in GCC’s investigation have been imposed with 70%, 37% and 17.6% respectively, while non-sampling cooperating companies (196 in total) have been imposed with 41.2%, and others have been imposed with 106% duty. Chinese exports have been hit by an average levy of 23.05%, while Spanish exports have not been penalised. The anti-dumping duty will be applicable for a period of five years.
Reasons for imposition of duty
The investigation has found that there was a significant increase in the volume of dumped imports from China and India, either in absolute terms or relative to the production, and an increase in the market share of these dumped imports at the contrary to the market shares of the GCC industry, Spanish imports, and other imports. Further, it was found that there is a large impact of dumped imports from China and India on the selling prices of the GCC industry, as it was found that there is a price undercutting between the average selling price of the GCC product and the average selling price of the product under investigation. Also, the GCC industry was not able to increase the selling prices to cover the cost of production. It was also found that there is material injury represented by the decrease in the volume of production and sales of the GCC industry, and the economic and financial indicators of the industry were negatively affected during the period of investigation.
GCC had started the anti-dumping investigation against ceramic and porcelain products originating from India, China and Span in November 2018. While the manufacture of these products within GCC states had been on the rise due to their own demand, aggressively priced imports continued to dominate the price-sensitive low segment of the market, leaving the Arab manufacturers to cater to the high-end market.
Indian ceramic tile exports
It is estimated that the GCC accounts for 35-40% of Indian ceramic tile exports, which would be Rs 3,500-4,000 crore in value terms. With most of India’s export shipments originating from the Morbi ceramic cluster in Gujarat, it is expected that this development will have a negative impact on the businesses of many SMEs and SSI units located there, many of whom are entirely dependent on the GCC market. The total Indian ceramic tile industry is estimated at Rs 26,000 crore in terms of turnover, and another Rs 10,000 crore in exports.
Tile exports from Morbi have grown at 20% CAGR during the last four years, with new markets opening in Indonesia, Philippines, Mexico, Brazil and Nepal besides GCC. The ongoing China-US tariff war has given Morbi manufacturers another opportunity to expand their global footprint.
Impact on Indian tile market
This development is likely to have a negative impact on the Indian tile industry, as the export volumes could get redirected towards the domestic market and create pricing pressure, at least in the short term. The domestic market is already facing stiff competition since the last couple of years due to the margin and profitability profile of many Morbi manufacturers.
While it was known that the investigation was nearing conclusion, Morbi exporters were expecting that GCC would defer the imposition of anti-dumping duty and were taken by surprise by this development, according to people who spoke to Sourcing Hardware.