As such, production costs have risen sharply while ceramic producers are not in a position to raise prices (with ceramic demand having declined amid the country's sluggish economic growth). Besides higher minimum wages, the higher gas price has a major impact as costs of gas account for around 30 percent of total ceramic production costs. The depreciation of the rupiah adds trouble as about 90 percent of raw materials for ceramic production (chemicals and clay) need to be imported from abroad.

Sinaga added that Indonesia's ceramic production capacity has expanded by 7.7 percent to 560 million square meters in 2015. Since 2011 companies have been eager to expand production capacity as demand was rising sharply. However, when new plants were opened and became operational ceramic demand was already in decline, implying additional capacity cannot be used. While at the beginning of the year ceramic producers were still operating at normal rates, production started to slow markedly from March/April onward. Sinaga said that several ceramic plants have stopped production altogether.

Indonesian Ceramic Industry 2009-2015:

  2011   2012   2013   2014   2015¹
Revenue (IDR trillion)     13     17     17     24     30     36     25
Growth YoY (%)    -20     30      0     41     25     20    -30

¹ indicates a forecast
Source: ASAKI

Regarding forecasts for the ceramic industry in 2016, Sinaga expects economic conditions to remain somewhat similar to conditions this year. However, optimal government spending and a successful push for infrastructure development would surely impact positively on Indonesia's ceramic industry. Another positive factor is that production costs will be cut due to government support. In a bid to support domestic industries, the government will lower energy prices for labor-intensive industries as part of its third economic stimulus package unveiled on 7 October 2015.