Not a Good Year for Indonesia's Ceramic Manufacturers
There still seems no light to appear at the end of the tunnel for ceramic manufacturers in Indonesia. The ceramic industry is largely dependent on the property sector. However, as Indonesia's property sector growth has remained insignificant so far in 2017, there is few room for ceramic sales growth. Moreover, local ceramic producers have to compete with cheap imports from abroad.
Normally, the ceramic industry feels the positive impact of big property projects' groundbreaking after about three months, when demand for ceramics suddenly rise steeply. However, without this stimulus from the property sector, it becomes difficult for ceramic producers to keep sales at a satisfying level.
Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), said ceramic sales in Indonesia have remained rather flat in the January-September 2017 period. Moreover, local producers have to compete with ceramic imports.
In full-year 2016 a total of 50 million square meters of ceramics were imported into Indonesia 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. Ceramic imports into Indonesia grew 27 percent in 2016, while domestic ceramic sales declined. This points at weak competitiveness of Indonesian-made ceramic.
Edy Sujanto, Chief Operation Officer at Arwana Citramulia (one of the big four ceramics manufacturers in Indonesia), agrees with Sinaga as he detects no positive impact yet from an improving Indonesian property sector in the third quarter of 2017. Currently, most of the company's sales involve end-users in the retail segment (for example those who renovate their home or build a new house).
However, Sujanto remains optimistic that Indonesia's ceramic sales will grow in the last quarter of 2017, particularly on the back of the government-led infrastructure development push in Indonesia. Arwana Citramulia targets to see a 15 percent (y/y) rise in revenue to IDR 1.74 trillion in full-year 2017, and a 44 percent (y/y) increase of net profit to IDR 130 billion. So far this year, however, shares of Arwana Citramulia have fallen 20 percent to IDR 416 a piece.
Ceramic Production in Indonesia:
| 2015 |
2016 | Y/Y Growth |
|
| Ceramic Tiles (in million m2) |
400 | 350 | -12.5% |
| Tableware (in million pieces) |
290 | 275 | -5.2% |
| Sanitary (in million pieces) |
5.4 | 5.1 | -5.6% |
| Roof Tiles (in million pieces) |
120 | 100 | -16.7% |
Source: ASAKI