CERAMIC SECTOR
CERAMIC SETBACKS
Compiled by Yamini Sequeira
THE GLUE THAT CERAMICS NEED
Mahendra Jayasekera presents a list of impediments facing the ceramic sector
The ceramic sector in Sri Lanka, which is deeply intertwined with the construction industry, is grappling with a host of challenges. A shift in the construction landscape, compounded by macroeconomic concerns, has led to a period of stagnation for many players in the ceramics market.
Mahendra Jayasekera says: “The construction industry has yet to take off. We are witnessing a slow recovery and there has not been a significant upward trend. Despite the slight economic improvement, the industry remains in a lull with many companies struggling to maintain full operational capacity.”
He elaborates that the local ceramic sector, particularly tiles and wall tiles, is heavily reliant on the strength of the construction market.
WEAK DEMAND He asserts that “in a healthy economy, increased home construction drives demand for ceramic products. However, the current rate of new construction is insufficient to support the ceramic sector’s full potential.”
“To meet capacity – without relying on imports – there needs to be at least 25 million square feet of new construction monthly,” he adds.
Yet, this level of activity remains elusive, especially beyond major urban centres where high-rise buildings dominate.
For ceramic manufacturers, the type of construction is just as important as the volume of new developments.
“We cannot expect 25 million square feet of new construction solely from high-rise buildings in Colombo. Instead, a greater emphasis must be placed on home building in the peripheries and outstations. High-rise buildings do not generate the same level of demand for ceramic products as residential home construction – especially in the growing suburban and rural areas,” Jayasekera explains.
The sector’s heavy reliance on local construction activities presents a fundamental challenge – particularly as the country’s construction industry continues to grapple with slow growth.
Despite a brief surge following the COVID-19 pandemic, driven by pent-up demand and import restrictions that led to a temporary boom, the long-term outlook remains grim.
“Although we were operating our factories at 100 percent capacity two years ago, we’re currently running at around 60 percent, underscoring the stark decline in demand,” Jayasekera laments.
One of the more insidious challenges facing the ceramic sector is the loss of skilled labour due to migration.
Jayasekera adds: “We have lost a considerable number of skilled workers and the trend of migration continues. A large number of young professionals have left the country in search of better opportunities overseas.”
“However, this migration is now encountering an obstacle because many countries that once welcomed Sri Lankan workers have tightened their immigration laws, leaving many young people frustrated and uncertain about their future,” he notes.
And he adds: “The issue is that young people cannot migrate as easily as in the past, leading to psychological challenges. When individuals are mentally discouraged, it becomes difficult to motivate them,” he opines, highlighting a critical issue facing the manufacturing industry today.
LACKING INNOVATION The global ceramic sector faces the broader issue of excess capacity, which limits the scope for meaningful innovation.
Jayasekera elaborates: “Excess capacity creates a disincentive for companies to invest in research and development. While there are incremental innovations in terms of product finishes, machinery and technology, we’re unlikely to see the real game changing innovations witnessed in industries such as electric vehicles (EV) and artificial intelligence materialise in the ceramic sector in the short term.”
“The sector remains relatively young, yet it struggles to achieve the level of innovation that would allow it to differentiate itself on the global stage… Whether these small improvements can revolutionise the sector is doubtful,” he adds, reinforcing the limitations on innovation in the light of existing market conditions.
Despite these challenges, the ceramic sector continues to adapt with companies striving to improve efficiency and quality within the constraints of the market. A critical issue that affects all sectors, including ceramics, is the country’s macroeconomic environment – particularly the perception of corruption.
“When there is a high corruption perception, people are hesitant to invest. This creates a vicious cycle where the lack of trust in the system stifles both local and foreign investment. In the past, Sri Lanka’s political climate allowed for moderate growth despite these high corruption perceptions; but this growth has not translated into long-term economic prosperity,” he declares.
GOOD GOVERNANCE As for the incumbent administration, he points to concerns regarding low growth coupled with lower corruption perceptions, noting that the challenges lies in achieving higher growth with a low perception of corruption.
Jayasekera suggests that the government must focus on inspiring the people and creating an environment that is conducive to business growth.
“I have yet to see political leadership that truly inspires citizens. Leadership is a critical element in overcoming the country’s economic hurdles,” he muses.
Alongside these macroeconomic concerns is the issue of entrepreneurship development. While there is considerable enthusiasm among the youth to pursue entrepreneurship, the environment remains unwelcoming.
“The hunger to become entrepreneurs exists but the system is not conducive. The regulatory landscape is complex, approvals are costly and market access is often restricted. As a result, despite Sri Lanka offering numerous entrepreneurship training programmes, they have not translated into a thriving entrepreneurial ecosystem,” he observes.
“Ease of doing business is still at a very low level, and there is a pressing need for systemic reforms to encourage new ventures and job creation,” he adds.
RARE OPPORTUNITY Despite these challenges, the entrepreneurial spirit is alive – though he says it’s “in a state of frustration.”
“Many young people are eager to build their own businesses but find themselves held back by bureaucracy, and a lack of support from the economic, social and political environment,” he avers.
He asserts that “as Sri Lanka’s ceramic sector continues to navigate these turbulent waters, the outlook remains uncertain. The shift in construction trends, the loss of skilled labour and the need for systemic reform in the broader economy all suggest a challenging road ahead.”
And Jayasekera says in conclusion that “the hunger for growth and development remains. It’s only a matter of creating the right conditions to let it flourish.” For the ceramic sector to thrive, a reawakening of the construction industry, along with stronger leadership and policy reform, will be crucial.
