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.
Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (Asaki), said Indonesia's ceramic sales in the first quarter of 2016 have remained bleak with no noticeable improvement in domestic sales detected.
Sinaga is optimistic though that sales will rise starting from the second quarter of the year. The organization of several exhibitions are expected to boost sales. At these events various new products are offered to consumers. One of the exhibitions that is estimated to boost ceramic sales was the Keramika 2016, held in the Jakarta Convention Center between 17-20 March. At this event domestic ceramic players offered various new products. Sinaga added that "it is important to show that the national ceramic industry is still alive amid weak macroeconomic circumstances and continues to show innovation through the release of new products."
Fifty participants and more than 30,000 visitors were present at Keramika 2016. Examples of ceramic manufacturers that were present at the event include Arwana, Indogress, KIA, Milan, Roman, Platinum, Mulia and TOTO.
Gas Price Not in Line with Crude Oil Prices
The performance of the ceramic industry will also depend on the gas price. Sinaga said it would boost the domestic ceramic industry if the government lowers the gas price for industrial use (gas accounts for between 30 - 40 percent of total ceramic production costs). Despite crude oil prices having fallen steeply, gas prices have remained high. Moreover, in the government's third economic stimulus package, unveiled on 7 October 2015, the Indonesian government announced it will lower gas and electricity prices for labor-intensive industries. However, the price of gas remained high although - according to the latest stories - the government will lower the gas price this month. The ceramic industry of Indonesia requests a 25 percent decline in gas prices.
Sinaga said Indonesian ceramic producers pay an average USD $9.1 per mmbtu (million metric British thermal units) for the ceramic production process, considerably higher than the USD $3 per mmbtu that manufacturers in Singapore pay, the USD $3 per mmbtu that manufacturers in Thailand pay, and the USD $5 per mmbtu that manufacturers in India pay. Indonesia's higher production costs make Indonesian-made ceramic products less competitive.