Economy, Business And Markets

Tile, Ceramics Industry Hit by Falling Demand

Tile, Ceramics Industry Hit by Falling DemandTile, Ceramics Industry Hit by Falling Demand

A  huge surplus of tile and ceramics has pushed the industry owners to shut their factories for 45 days in order to sell the piled up products, the Iranian daily Ta’adol reported.

While the latest statistics indicate a positive growth in tile and ceramics production over the past months, demand has been far less than supply and almost all factories have run out of storage capacity. That is why the Iranian Ceramic Producers Syndicate decided to stop production for 45 days as of March 6.

“The shutdown will partly overlap with the Nowruz holidays (March 20-April 2) when most factories usually close to carry out maintenance operations,” said syndicate chairman, Behnam Aziz-Zadeh.

Although the industry’s production rate during the first 10 months of the current Iranian year (March 21, 2014- January 20, 2015) recorded 26.8% growth compared to the similar period last year, it is suffering from low demand in the domestic and export markets. Tile factories are currently operating at less than 70% capacity mainly due to the reduction in exports to Iraq, which holds as much as 80% of the export market. This year, tile and ceramic exports to the neighboring country declined by 10% to 15% compared with the previous year.

 Housing Market Influence

The downturn in Iran’s construction sector is also another crucial factor which has led to reduction in demand for construction materials including cement, steel products, as well as tiles. The unprecedented recession in the housing sector, combined with the decline in the number of government’s capital projects due to shortage of funds, have hit the construction sector in the past three years.  

The tile sector manufactured 500 million square meters of tile and ceramics during the previous Iranian year (ended March 20, 2014), and it was predicted that the figure would reduce to 450 square meters this year. But under the current circumstances, production is expected to fall well below 400 million square meters, said Aziz-Zadeh.

Member of the board of directors at Iran’s House of Industry and Mine, Arman Khaleqi says the tile and ceramics industry has great potential in Iran due to abundant sources of raw minerals and inexpensive energy. But, he says, many tile factories run into a crisis even with a slight drop in demand as their warehouses do not have sufficient capacity for more production.

“The tile and ceramics manufacturers need to find new export markets to avoid surplus production”, said Khaleqi, adding that the great quality and diverse designs of Iranian tiles are appreciated in the neighboring countries such as Afghanistan, Iraq, the CIS countries, and the Arab states around the Persian Gulf.

 Excess Production Capacity

A serious challenge for the tile and ceramics industry is that the current production capacity is twice the domestic needs and the situation is worsened by the economic recession and slowdown in the construction sector, said Kamal Seyed-Mohseni, a member of the Iranian Ceramic Producers Syndicate’s board of directors. He urged the ministry of industry, mine, and trade to limit the issuance of licenses for establishing tile factories, emphasizing that it would lead to both production surplus and export of low-quality products.  

“Tiles and ceramics in warehouses have exceeded 350 million square meters,” said Seyed-Mohseni, adding that the factory owners’ problems are intensified due to lack of funds “as banks are either unwilling or unable to provide companies with sufficient funds”.

Industry experts warn that if the situation persists, factories will have to decrease production substantially and start lay offs.