Rubber Glove Industry of Indonesia Needs a Cheaper Gas Price
Rubber gloves manufacturers in Indonesia are pessimistic about their business in 2017. This pessimism is caused by the lack of clarity whether - or when - the Indonesian government will lower the gas price for the rubber glove sector. Indonesia's high gas price gives rise to high operational costs for Indonesia's rubber glove producers. Reportedly, a number of local rubber glove factories have ceased production since late-2015.
Although Indonesian President Joko Widodo already signed Presidential Regulation No. 40/2016 on the Natural Gas Price, there are only three local industries that can now enjoy a cheaper gas price, namely the fertilizer, petrochemical, and steel industries. This regulation is part of the government's third economic policy package (which was released on 7 October 2015). Through this package Indonesia's Energy and Mineral Resources Ministry is set to lower gas prices (for specific industries) "by a maximum of USD $2 per 1 mmbtu if gas prices are higher than USD $6 per mmbtu".
However, in the presidential regulation Indonesia's rubber glove, glass, oleo-chemical, and ceramic industries are also promised a lower gas price but industry players are still waiting for the government to deliver on its promise.
Achmad Safiun, Chairman of the Indonesian Rubber Gloves Association (ASTA), says the nation's rubber glove industry has been experiencing hard times over the past couple of years and he sees few room for recovery if the gas price remains high. In fact several factories have ceased operations due to the unconducive circumstances. While foreign counterparts in the region can enjoy a USD $4.5 per mmbtu price, Indonesian rubber glove producers need to pay a USD $12.2 mmbtu gas price. This means Indonesian rubber glove producers are less competitive compared to their foreign counterparts.
Currently, Indonesia exports about 90 percent of its rubber glove production, mainly to the United States and Europe. In full-year 2016 Indonesia's rubber glove exports were worth USD $232.5 million.
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