Ceramic production cost to increase 30%

The production cost in the ceramic sector will increase up to 30% due to the latest industrial gas price hike in the country, said industry insiders.

They fear the sector, which is heavily dependent on gas supply for production, will face a severe crisis as a result of the hike.

"Gas is one of the main raw materials of the ceramic industry. About 12% of the total production cost of ceramic products goes for gas," Irfan Uddin, general secretary of the Bangladesh Ceramic Manufacturers and Exporters Association, told The Business Standard.

He said, "It is not possible to increase the prices of ceramic products in line with the gas price hike even if we want. As a result, the entrepreneurs will face a financial loss."

In 2019 when the gas price for industries was increased by about 38%, the average production cost of ceramic products rose by 10% to 12%, he recalled. "In 2022, gas prices were increased by 40% more in two phases. Now the latest 155% price hike puts us in grave danger. As a result, it will be difficult for the entrepreneurs of this sector to survive," said the entrepreneur.

Irfan Uddin, who is also the managing director of Farr Ceramic, said, "The price of raw materials has increased by at least 35% in the last six months in the international market. It increased by another 30% due to the dollar crisis. Besides, delivery charges, marketing costs, and labour costs have also increased in the local market."

According to sources, there are around 70 ceramic factories (tableware, tiles and sanitary ware) in the country with a domestic and foreign investment of about Tk13,500 crore. Every year, this sector exports products worth about Tk400 crore and generates government revenue of about Tk3,000 crore. The industry also pays an annual gas bill of about Tk1,200 crore.

About five lakh people are directly and indirectly involved in this industry. However, entrepreneurs fear that the gas price hike along with an interrupted gas supply could force them to lay off some workers.

Md Shirajul Islam Mollah, president of the Bangladesh Ceramic Manufacturers and Exporters Association, said, "The production cost has already increased by 20% due to the use of generators amid the gas crisis. Many companies have stopped production. The latest gas price hike will only worsen the situation. We will become less competitive in the international market."

He said, "The ceramic sector has established itself as an import substitute industry after facing many difficulties. But as the gas price continues to rise, the entrepreneurs of this gas-dependent industry are afraid of losing their business."

He also expressed concern that the local products will lose the market to foreign products due to the production cost hike.

Mohammed Humayun Kabir, chief executive officer of Shinepukur Ceramics Ltd, "Shinepukur is the top tableware manufacturer in the country. But it will lag behind in competition in the international market due to the gas price hike."

"The freight charge increased in the international market after the start of the Russia-Ukraine war. Since then, the price of raw materials has increased by at least 40%. Other operational costs have also increased by at least 20%. This cost will increase by 13%-14% due to further an increase in gas prices," he said.

Mohammed Humayun Kabir further said, "The government has announced to increase the gas prices. However, they have not promised an uninterrupted gas supply. The pressure of gas that we have been getting since June is not enough for production. On the other hand, the gas bill has almost doubled. In this situation, the industry cannot survive."