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Is Morbi’s Ceramic Tile Industry at Risk of Further Shutdowns? Morbi (Gujarat), which accounts for nearly 70–75% of India’s total ceramic tile production and a significant share of exports, is witnessing heightened operational stress. In Q3FY26, Gujarat Gas volumes in Morbi declined sharply by ~50% YoY to ~1.7 mmscmd (vs. 3.4 mmscmd YoY and 2.1 mmscmd QoQ), signaling a meaningful slowdown in production activity. Additionally, lower propane prices (Rs 3/SCM cheaper vs GGas in Q3FY26) have led several units to switch to propane, further impacting gas consumption.

Due to gas supply constraints arising from recent international developments, supply from Gujarat Gas to Morbi has been restricted by ~50%. At the same time, propane supply has also been disrupted by ~70%. Coupled with export disruptions—with India exporting ~25% (as per Apr-Dec’26 export) of its ceramic tiles to the Middle East—this has led to the temporary shutdown of nearly 62% of units in Morbi. The disruption could also impact on the domestic market by increasing competitive intensity as affected players look to divert volumes locally.

However, India’s 4–5 FTAs signed/concluded in CY25–CY26 are expected to boost ceramic tiles exports in long term, similar to the UAE-FTA (CY22) which drove 22.6% CAGR in tile exports (FY21–25), opportunities may emerge in markets like the UK, Oman, and the European Union that together account for a meaningful share of India’s ceramic tile exports.

* Of the ~900 ceramic tiles units in Morbi (370 fully gas-based and ~530 dualfuel units using gas and propane), shutdown levels have risen materially due to fuel crisis arise with geopolitical tensions in middle east, with nearly half of gas-based units and ~70% of dual-fuel units temporarily ceasing operations, underscoring severe stress in the cluster.

* Gujarat Gas prices corrected ~13% QoQ to Rs44.9/SCM in Q3FY26, even after its price higher than Propane (Rs 3/SCM cheaper vs GGas in Q3FY26). However, recent international developments are expected to drive a significant increase in prices due to supply disruptions.

* The situation has been further aggravated by geopolitical tensions affecting RLNG availability, prompting Gujarat Gas Limited to invoke force majeure and restrict gas allocations, including termination of certain MGO agreements. These supply constraints limit production flexibility and add to operational uncertainty.

* The conflict zone (nine countries combined) accounts for ~18% of India’s ceramic tile exports, while the Middle East region accounts for ~25%. If geopolitical risks and conflicts remain elevated, Morbi’s ceramic tile industry may continue operating at moderate utilization levels in the near term, with the risk of additional factory shutdowns until trade flows stabilize and demand conditions improve.

* At an industry level, the Indian ceramic tile sector has faced soft domestic and export demand, with FY25 witnessing a sharp export slowdown due to elevated ocean freight rates and geopolitical uncertainty.

? Higher freight costs significantly impacted Morbi-based exporters over the past two years, leading to inventory accumulation and dumping in the domestic market, thereby intensifying pricing pressure on organized players such as Kajaria Ceramics (KJC) and Somany Ceramics.

* Despite weak demand, KJC and Somany reported volume growth of ~6% and ~2%, respectively, in FY25, although EBITDA margins contracted by ~190bps and ~150bps to 13.5% and 8.3%, respectively.

* Encouragingly, reduced dumping by Morbi players could gradually ease domestic pricing pressure, supporting a recovery in margins. In 9MFY26, KJC and Somany reported marginal volume growth of ~0.5% and ~1.7% YoY, respectively, and KJC expects India’s ceramic tiles exports to reach ~Rs160bn in FY26 (stood at Rs 120bn in 9MFY26).

* Overall, while Morbi’s ceramic tile cluster faces near-term risks of further shutdowns amid weak exports and fuel/gas supply constraints, medium-term structural tailwinds from industry formalization and export normalization could help stabilize operations once demand conditions improve.

* India has signed or concluded 4–5 Free Trade Agreements (FTAs) in CY25– CY26, which are expected to improve exports from India across several products, including ceramic tiles. We note that in CY22, when India signed an FTA with the United Arab Emirates (UAE), India’s ceramic tile exports to the UAE delivered 22.6% CAGR over FY21–25, reaching Rs13.4bn in FY25 and Rs10.9bn in 9MFY26. Currently, the UAE accounts for ~7.6% of India’s ceramic tile exports, the highest share for any single country. We believe a similar opportunity could emerge following FTAs signed with the United Kingdom, Oman, and the European Union, which currently account for ~4.9%, ~1.8%, and ~12.3%, respectively, of India’s ceramic tile exports.

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