High inflation, overvalued rupee, a blow to ceramics industry - Dankotuwa Porcelain Chief

by Lalin FERNANDOPULLE

The ceramics industry, a major export earner will crash due to high inflation and the overvalued rupee, said Chairman, Dankotuwa Porcelain PLC, Sunil Wijesinghe.

He said the ceramics industry will not be able to survive in the highly competitive international market due to the inflated energy cost and the overvalued rupee.

"The ceramics industry needs a level playing field and not concessions.The competitiveness of the industry is affected by the high cost of production and the appreciation of the rupee", Wijesinghe said.

Ceramic exporters cater to high end niche markets and they are not volume producers driving competitive edge through low price or low input cost. He said ceramics factory owners cannot pay the salaries of employees and sustain businesses due to the low demand in major exporting countries.

Orders from the United States and Europe have been cancelled and exports to India and Pakistan have been put on hold due to the Mumbai attacks and the crisis in Islamabad.

There will be no remedy for the ailing ceramics industry if steps are not taken to depreciate the rupee and slash fuel prices. The energy cost is around 50 per cent of the direct manufacturing cost. Despite the drastic decline in world oil prices, fuel prices in Sri Lanka are high.

According to economists the rupee should be allowed to depreciate to save the export sector.

A forced depreciation later will have adverse effects. He said it is important to have a transparent pricing formula in keeping with world market prices.

It is easy for exporters to negotiate prices with buyers based on world market movements of energy and commodities rather than trying to make them understand distortions in the local market.

The ceramics industry is affected by the global recession and the internal economic crisis.

Many countries have reduced imports of non essential items and have switched to cheaper products.

The ceramics sector consists of wall and floor tile manufacturers, porcelain tableware, ornamental ware, roofing tile and brick and tile manufacturers.

Wall and floor tile manufacturers cater primarily to the local market except the Lanka Walltile Balangoda factory. Dankotuwa Porcelain sells 15 per cent of its products to the local market.

The Sri Lanka Ceramics Council has called upon policymakers to increase the local market share and the loan term repayment period as measures to sustain the industry.

The local market share of the ceramic industry is 20 per cent. Exporters said that over 80 per cent of the export volume has dropped. Wijesinghe said despite challenges, Dankotuwa Porcelain will manufacture new designs for niche markets.

The company has taken steps to reduce expenditure during the crisis period.