Ceramic Industry Indonesia: Bleak Local Demand, Exports Rise
Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), still expects domestic demand for ceramic products to remain bleak as there are no signs of improvement originating from Indonesia's property sector (compared to last year). However, Indonesia's ceramic exports are expected to rise in 2017.
Local ceramic producers in Indonesia are confident that exports will rise this year as ceramic demand in several Southeast Asian nations has been growing. Therefore, these manufacturers are much more optimistic about their exports compared to sales on the domestic market of Indonesia. However, both on the international and domestic market Indonesian ceramic manufacturers have to compete with their Chinese counterparts.
Ceramic imports into Indonesia could rise by 20 percent (y/y) in 2017 with most imports originating from China where the structural ceramic oversupply situation encourages Chinese manufacturers to aggressively penetrate the global market by offering their ceramic products at attractive rates. China is estimated to have an installed annual ceramic production capacity of 8 billion square meters. However, ceramic domestic demand in the world's second-largest economy only stands at 5 billion square meters.
Based on data from Statistics Indonesia (BPS), Indonesia's ceramic exports rose 5.2 percent (y/y) to USD $116.1 million in the January-April 2017 period. ASAKI Chairman Sinaga hopes to see double-digit growth at the year-end. However, he adds this will require support from the government. Through Presidential Regulation No. 40/2016, which is the follow-up of the government's third economic policy package (that was released on 7 October 2015), the central government promised to lower the gas price for (among others) the ceramic industry. However, ceramic producers are still waiting for the government to stick to its promise. A large chunk of production costs in the ceramic manufacturing sector stem from gas.
Read more: Natural Gas Price Indonesia Remains High Despite Gov't Promise
Indonesian ceramic manufacturers pay a USD $9 mmbtu gas price, while foreign counterparts in the region can enjoy a gas price in the range of USD $3 - $4 per mmbtu price. This is one of the main reasons why Indonesian manufacturers have difficulty to compete with foreign counterparts.
Indonesia's annual installed ceramic production capacity is currently 580 million square meters. However, actual production reached only 375 million square meters in 2016. Hence, the utilization rate of Indonesian ceramic manufacturers only stands in the range of 60-65 percent.