Ceramic Industry in Indonesia: Rising on Property & Infrastructure Projects
The ceramic industry in Indonesia is expected to grow about ten percent in 2015 amid the country’s +5 percentage point GDP growth. Economic expansion translates to increased purchasing power of Indonesian consumers and the ceramic industry is one of the industries that will benefit from this. Moreover, as Indonesian President Joko Widodo targets +7 percent GDP by the end of his term, new infrastructure and property projects are to rise as well. As such, domestic ceramic demand will increase accordingly.
Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), said that Indonesian ceramic sales may grow to reach IDR 43 trillion (USD $3.6 billion) in 2015.
In 2014, growth of domestic ceramic sales have been a bit disappointing amid an uncertain domestic context. Due to Indonesia’s legislative and presidential elections, several investors postponed projects (for example property projects) until a new government had been formed. Sinaga said that since October 2014 (when the new cabinet composition had been announced), ceramic sales have shown a recovery.
Despite Indonesia’s rising ceramic demand, domestic production capacity is still sufficient to meet local demand. The country’s annual ceramic production capacity is currently about 550 to 560 million m², while local ceramic demand is expected at 430 to 450 million m² this year.
The ceramic sector still has plenty room for growth considering that Indonesia is experiencing structural economic growth leading to a rapidly expanding middle class segment while Indonesia’s per capita ceramic consumption is still low at nearly 2 m², considerably lower than in Thailand (4 m²) and Malaysia (3 m²).
One of the main obstacles in the ceramic industry is that limited gas supplies hamper the industry's expansion. Gas is one of the most important 'ingredients' for ceramic production (costs of gas account for about 30 percent of total ceramic production costs in Indonesia). Particularly in the western and central parts of Java such sufficient gas supplies form a problem. Sinaga added that 90 percent of raw materials for ceramic production (such as chemicals and clay) still need to be imported from abroad.
Indonesia is the sixth largest ceramic producer in the world, after China, Italy, Spain, Turkey and Brazil. There are 35 Indonesian ceramic manufacturers with a total of 80 factories, providing employment opportunities to about 200,000 people in Indonesia.