'Persisting gas crisis to hurt many ceramic-makers'

Khourshed Alam, director (Operations) at AkijBashir Group, talked about the ceramics industry of Bangladesh and the current crisis it is facing during an interview with The Business Standard's Abbas Uddin Noyon.

What is the biggest problem in the ceramics industry, and how are you navigating through it?

The ceramics industry is going through a very difficult phase in terms of energy availability and a slowdown in demand amidst an economic downturn triggered by the war in Ukraine and the subsequent dollar crisis.

It has never faced such a big challenge as supply is way higher than demand, leading to a price war among players in the industry. This situation raises serious concerns about profitability, and in fact, survival may become an issue for some companies.

Are you facing any problem in importing raw materials due to the dollar crisis?

As an industry, yes, we are facing problems importing raw materials for our products. As you know, the industry relies on imports for more than 90% of its raw materials.

The industry imports raw materials primarily from European countries, particularly Spain and Italy, as well as from China, India and Thailand. Companies that have their own dollar earnings through exports are in a relatively better situation when it comes to importing raw materials. However, others are experiencing challenges in importing raw materials, resulting in decreased production for some players.

Gas shortage has been a persistent threat to the ceramic sector for a significant period of time. How are you addressing this crisis?

Gas is essential for ceramics production and addressing the long-standing issue of gas shortage is crucial for the survival and growth of the industry. The first step should be ensuring a consistent supply of gas, followed by an adequate supply.

If you receive gas with fluctuating pressure, it will affect both the quality and productivity. Consequently, if you fail to achieve the desired level of quality and efficiency, your production costs will increase, and the rate of product rejections will also rise. These factors will have a direct impact on the profitability.

Next, there is the issue of obtaining an adequate supply of gas. Insufficient quantity of gas is acting as a barrier to the growth of the ceramics industry.

In February, gas prices surged significantly, but the supply situation did not improve substantially. As a result, the industry is facing a situation where it is paying higher prices for gas but not receiving the required quantity in a consistent manner.

The inconsistency in gas pressure is posing additional challenges for the ceramics industry. Companies are forced to halt kiln production at least an hour before the supply stoppage, and when the supply resumes, it takes another hour to reach the peak of the heat for production.

Actually, some companies are just doing business to stay afloat and, if the situation persists, they will collapse.

You have increased prices following a surge in production costs. Has that reduced demand? Has there been any impact on the overall market?

Yes, in February, some companies increased the prices of their ceramic products, although the increase was not comparable to the rise in production costs.

The total production costs have increased by 35% but the prices of the finished products have increased by 7-8%

At this moment, the market situation is at a standstill. Government projects are slowing down, and there is a noticeable decline in the real estate sector, which is directly impacting the demand for ceramic products.

As a whole, the industry is grappling with low demand while its capacity continues to grow. Consequently, the overall market sentiment is negative.

Akij is continually investing in its expansion in both local and global markets. How is the export market for ceramic products currently performing?

Innovation and development are core competencies of AkijBashir Group. The company consistently strives to excel and create new offerings that excite customers.

We always prioritise investments in the latest available technologies, as they enable us to achieve the highest levels of efficiency and productivity. By leveraging these technologies, we are able to effectively reduce costs.

And this spirit is endless. This is AkijBashir. We will continue to do that.

We see huge potential in the export market for tableware and sanitary ware, and as a result, we are exploring new markets for these products.

In terms of tiles, we see less potential. But if we can start slab production in the future, we will be able to compete with India and China in terms of price in the export market.

How is your position in the ceramics market? How do you see the future prospects of this market?

In recent times, numerous new players have entered the industry and offered very low prices as a strategy of market entry. This has significantly changed the dynamics of the marketplace. But, despite this, AkijBashir has successfully maintained its leadership position in the tableware and kitchenware segment.

As a brand, Akij believes it holds the number one position in the ceramics market. In terms of volume, Akij has achieved a double-digit share in all three segments of the market.