By Nandini Oza
The West Asia crisis has forced a large-scale production halt in Gujarat’s Morbi ceramic cluster, with over 400 of around 700 units suspending operations till mid-April amid disruptions in propane and natural gas supplies from the Gulf. The shutdown marks a fresh setback for an industry already grappling with export headwinds.
The Morbi cluster, which accounts for a significant share of India’s ceramic tile output and has an annual turnover of about Rs 70,000 crore, relies heavily on imported fuel to run its kilns. Industry executives told Fe that units had begun shutting in phases as fuel availability tightened and prices hardened following supply disruptions linked to the conflict.
Nearly 20% of global liquefied natural gas trade passes through the Strait of Hormuz, where shipping has slowed and risks have escalated. Iran’s warning of potential action against vessels has added to fears of supply bottlenecks and cost escalation, directly impacting fuel availability for the sector.
Fuel Stranglehold
At a meeting of the Ceramic Tile Manufacturers Association on Tuesday, companies decided to review the situation around April 10-15. Manoj Arvadiya, president of the Morbi Ceramic Manufacturers Association (vitrified tiles), said over 400 units would use the shutdown period for maintenance, which is typically scheduled in April. He added that units need propane and natural gas at viable prices, not elevated rates that make operations unviable.
Haresh Bopaliya, president of the association, said about 70% of units depend on propane and the rest on natural gas. Only a limited number of corporate-run units and sanitary ware makers continue to operate.
The disruption has raised concerns over employment and cash flows in a cluster that supports an estimated 350,000 jobs directly and indirectly. Nilesh Jetpariya, former president of the association, said prolonged closures could affect salary payments, with some workers already returning to their hometowns. The shutdown is also expected to hit allied sectors such as packaging and paper, given the cluster’s linkages.
Economic Fallout
The industry has yet to quantify losses, which will depend on how quickly fuel supplies normalise. Of the total turnover, exports account for about Rs 20,000 crore, including Rs 5,000 crore to Gulf markets, which now face risks from both demand disruption and logistics constraints.
A Crisil Ratings note on Wednesday underlines the broader stress. It estimates the ongoing West Asia conflict could shave 1-2% off industry revenue this fiscal, with export revenue declining 6-7% due to disrupted shipping and higher freight and insurance costs. “Availability of gas, weak demand from the region and higher logistics costs will hit production schedules; a prolonged disruption could lead to longer shutdowns and losses,” said Nitin Kansal, director at Crisil Ratings.
Crisil added that operating margins may contract by 130-150 basis points to a five-year low, while credit profiles could weaken if disruptions extend beyond 30-40 days despite current liquidity buffers.