Production of heavy equipment in Indonesia is targeted to grow 14 percent to 4,200 units in 2017, compared to 3,678 produced units in the preceding year. This growth should come on the back of rising activity in the nation's mining sector, particularly Indonesia's coal mining sector, in line with rising commodity prices.
Jammaludin, Chairman of the Indonesian Heavy Equipment Manufacturers Association (Hinabi), is optimistic the above-mentioned target will be achieved because the coal price surged drastically in the second half of 2016. He added that about 60 percent of heavy equipment sales are expected to originate from the mining and construction sectors.
Indonesia's benchmark thermal coal price (Harga Batubara Acuan, or HBA) surged from USD $51.20 per metric ton in May 2016 to USD $101.67 per ton in December 2016. However, after this USD $101.67 per ton peak in December, the HBA price then plunged 18 percent over the January-February 2017 period and the direction of the coal price in 2017 remains heavily dependent on the stance of Chinese authorities toward their domestic coal production. Therefore, there remains great risk of significant price volatility on international commodity markets, hence undermining the basis for any heavy equipment production targets.
In the second half of 2016 the rising coal price triggered rising sales of heavy equipment in Indonesia and therefore the full-year 2016 heavy equipment production number - at 3,678 units - was slightly higher compared to the 3,535 units that were produced in full-year 2015. The table below shows the big impact of plunging commodity prices (after 2011) on heavy equipment production figures in Indonesia:
Heavy Equipment Production Figures in Indonesia:
Meanwhile, the construction sector of Indonesia has also failed to be a big consumer of heavy equipment units in line with Indonesia's bleak property market, while units that are used for the nation's infrastructure development projects are usually secondhand units, not new ones. In 2016 only 30 percent of heavy equipment sales went to the construction sector, below expectations of Hinabi.
Jamaludin also added that Trade Ministry Regulation No. 77/M-DAG/PER/11/2016 on Regulations of Tire Imports, which was implemented on 1 January 2017, makes it more difficult to import tires for trucks in Indonesia, especially for dump trucks (while this type of tire is not manufactured in Indonesia). This regulation was introduced to limit huge quantities of tire imports into Indonesia.