Sales of Ceramics in Indonesia Expected to Plunge 10% in 2014
With slowing economic growth and a stricter monetary policy approach of the central bank, Indonesia's ceramic industry is expected to record slowing growth in 2014. This year, the country's ceramic sales are projected to amount to 400 million square meters (m²). About 12 percent of this amount is exported to countries abroad. However, in 2014, sales are expected to plunge by 5 to 10% to 360-380 million m². A weakening rupiah and slowing property sector, which accounts for significant ceramic demand, are the major causes of the decline.
In order to avert a housing bubble in Indonesia (and avert speculative buying) as well as to slow credit growth in Southeast Asia's largest economy, Bank Indonesia introduced new mortgage regulations in September 2013 and gradually raised the country's benchmark interest rate (BI rate) from 5.75 percent to 7.50 percent in November 2013.
The new mortgage regulations involve an increased mandatory minimum down payment for additional property purchases, aimed to decelerate the mortgage growth rate. Bank Indonesia reduced the loan-to-value (LTV) ratio for the purchase of a second property (measuring over 70 m²) to 60 percent and lowered it to 50 percent for purchases beyond the second property. For first-time home buyers, however, whose property sizes are below 70 m² the regulation does not apply. Lower property sales are expected to lead to reduced property construction and thus less demand for ceramics.
Another concern for Indonesia's domestic ceramic industry is the sharply depreciated rupiah exchange rate. This year so far, the rupiah fell 24.1 percent against the US dollar. This causes a significant rise in ceramic production costs as the gas supply is paid in US dollars (costs of gas account for about 30 percent of total ceramic production costs) but it is difficult for ceramic producers to pass on costs to consumers as ceramic demand has already fallen recently.
Indonesia's Ceramics Industry 2009-2013:
| 2009 |
2010 |
2011 | 2012 | 2013 | |
| Revenue (IDR trillion) | 13 | 17 | 17 | 24 | 30¹ |
| Growth YoY (%) | -20 | 30 | 0 | 41 | 20¹ |
¹ indicates a forecast
Source: ASAKI
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