After years of struggle the outlook for Indonesia's ceramic industry looks a bit more positive now. In recent years Indonesia's domestic ceramic industry has been plagued by subdued growth in Indonesia's property sector, while there also emerged increasing competition from Chinese counterparts (who are facing a structural ceramic oversupply at home and therefore, aggressively, try to penetrate the Southeast Asian market by offering their ceramic products at attractive rates).

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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.

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Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), is concerned about the zero percent import duty policy (applied per 2018) for Chinese ceramics that are shipped into Indonesia. This policy could lead to massive ceramic imports from China and encourage the deindustrialization in Indonesia's ceramic sector.

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The ceramic industry of Indonesia remains under pressure in 2017 due to low demand from the property sector and the high gas price. Therefore, there are reports that various ceramic producers have (temporarily) closed their factories and are now active as traders only. Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), urges the government to lower gas prices immediately in order to support the nation's ceramic industry. Gas prices account for between 30 - 40 percent of Indonesian ceramic producers' total production costs.

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Indonesia's ceramic industry has cut utilization of its total installed production capacity to the range of 30 - 50 percent, implying that ceramic manufacturers in Southeast Asia's largest economy are producing less than half of what they could produce. Low utilization of production capacity is the result of weakening ceramic sales over the past couple of years (mainly due to the sluggishly performing property sector of Indonesia). Some ceramic producers have slashed prices by up to 20 percent in a bid to boost sales and reduce stockpiles of ceramics at their warehouses.

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Several Indonesian ceramic producers have reportedly stopped production as stocks of ceramics are piling up at their warehouses. Normally, in the good old days when there existed high demand for ceramic products (due to Indonesia's booming property sector), stocks of ceramics lasted for only two weeks. Now, however, amid sluggish growth of Indonesia's property sector, the existing stocks of ceramics are estimated to cover at least three months.

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The Indonesian Ceramic Industry Association (Asaki) estimates that production costs in Indonesia's ceramic industry could decline up to 35 percent now the government plans to lower the gas price for industrial usage. Elisa Sinaga, Chairman of the Asaki, said Indonesian ceramic producers currently pay an average USD $9.1 per mmbtu (million metric British thermal units) for the ceramic production process, considerably higher than the gas prices that manufacturers pay in Singapore, Thailand, and India. This difference makes Indonesian ceramic products less competitive.

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Ceramic sales in Indonesia in the first quarter of 2016 are estimated to stand at 85 million square meters (m2) only, far below the 100 million m2 target that was set by the Indonesian Ceramic Industry Association (Asaki). Weak demand for ceramics in Indonesia is primarily caused by the country's sluggish property sector that is yet to rebound after several years of slowdown. Elisa Sinaga, Chairman of Asaki, stated that despite ceramic sales having improved slightly in late-2015, demand fell again in the first quarter of 2016 and remained weak up to the start of April 2016.

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Although ceramic sales in Indonesia are flat in Q1-2016, some stakeholders remain optimistic that sales of ceramics in Indonesia may grow 20 percent (y/y) to 433 million square meters in 2016. This growth comes on the back of the government's push for infrastructure development, promotional activities (conducted by Indonesia's ceramic industry), and the lower gas price. Infrastructure development will encourage property development. With the property sector being the largest buyer of ceramics, Indonesia's ceramic industry should thrive on government-led infrastructure development.

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Indonesia's ceramic sales are estimated to remain sluggish in the first quarter of 2016. Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (Asaki), said domestic ceramic sales are estimated to be around 90 million square meters in Q1-2016, stagnant from sales in the same quarter last year. In full-year 2015 Indonesia's ceramic sales plunged 28.6 percent year-on-year (y/y) to 360 million square meters. The nation's ceramic industry has been plagued by Indonesia's slowing economic growth, particularly the slowdown in Indonesia's property sector.

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Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), still expects domestic demand for ceramic products to remain bleak as there are no signs of improvement originating from Indonesia's property sector (compared to last year). However, Indonesia's ceramic exports are expected to rise in 2017.

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Utilization of Indonesia's installed ceramic production capacity fell from 92 percent in 2014 to 62 percent in 2015, while the country's ceramic sales plunged 28.6 percent (y/y) to 350 million square meters over the same period. Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), said ceramic sales have fallen over the past two years due to slowing economic growth and the sluggish property sector. Sales are expected to remain stagnant in 2016.

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Higher sales, higher selling prices, and lower production costs are expected to impact positively on the performance of Arwana Citramulia, one of Indonesia's big four ceramic manufacturers. The company's ceramic sales volume is projected to surge 35 percent (y/y) to 53 million square meters in 2016 from this year's estimated 40 million square meters, partly supported by the start of operations of Arwana Citramulia's new factory in Mojokerto (East Java). Arwana controls about 26 percent of Indonesia's ceramic tiles market among low-income consumers with its two flagship brands: Arwana and Uno.

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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.

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Indonesia's ceramic industry recorded sales amounting to IDR 14 trillion (USD $1.4 billion) in the first six months of 2013. This implies a 27 percent increase compared to ceramic sales in the same period in 2012. The increase is particularly caused by higher sales prices in January and March 2013 which were introduced to mitigate higher gas and electricity tariffs as well as higher minimum wages. Generally, ceramic prices rose 10 to 15 percent. Ceramics sales volume in semester I-2013 increased to 190 million m² from 180 m² in 2012.

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