Update COVID-19 in Indonesia: 1,713,684 confirmed infections, 47,012 deaths (9 May 2021)
9 May 2021 (closed)
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
Jakarta Composite Index (5,928.31) -41.93 -0.70%
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.
Elisa Sinaga, Chairman of the Indonesian Ceramic Industry Association (ASAKI), said sales of ceramics fell 40 percent in the first half of 2016, implying that this sector has not been positively affected yet by Indonesia's overall accelerating economic growth performance in the first half of the year. In the first two quarters of 2016 Indonesia's GDP growth rose by 4.91 percent (y/y) and 5.18 percent (y/y), respectively. These were better figures compared to 4.73 percent (y/y) in Q1-2015 and 4.66 percent (y/y) in Q2-2015. However, accelerating economic growth does not immediately lead to sharply growing property and construction sectors and therefore Indonesia's ceramic industry needs some more time to recover. However, there are concerns that some ceramic producers have limited time and the recovery may come too late.
ASAKI Chairman Sinaga informed that sales in the nation's ceramic industry had already fallen by 30 percent in full-year 2015. In combination with the 40 percent (y/y) decline in the first half of 2016 Sinaga has become pessimistic about achieving the ceramic sales target that was set for 2016. ASAKI's target for ceramic sales in 2016 was set at 400 million square meters. If existing conditions persist, then Indonesia may only see ceramic sales of around 350 million square meters this year (a figure far below the nation's total installed ceramic production capacity at 550 million square meters per year).
Sinaga also said Indonesia's ceramic stakeholders are still waiting for the government to keep its promise to lower gas prices (which contribute significantly to ceramic companies' production costs). Although lower gas prices will not cause rising sales, it could avert more layoffs in Indonesia's ceramic industry. If the government waits too long with lowering gas prices it might even result in deindustrialization in Indonesia's ceramic industry (given that some manufacturers have already halved their ceramic output, the next step could be to close the factories).
Stockpiles of ceramic at warehouses have been growing in recent years. Whereas it was normal to have ceramic reserves that could last for two weeks up to one month, currently stockpiles are sufficient to last for up to three months.
In the government's third economic policy package (released on 7 October 2015) the Energy and Mineral Resources Ministry of Indonesia issued a regulation that lowers gas prices (for specific industries) "by a maximum of USD $2 per 1 mmbtu if gas prices are higher than USD $6 per mmbtu". This incentive is only available to Indonesia's fertilizer, petrochemical, stainless steel, ceramic, glass, oleo-chemical and glove industries. However, these industries are still waiting for the gas price to fall.
This means that Indonesia's ceramic industry remains uncompetitive compared to foreign counterparts. Whereas Singaporean ceramic producers pay USD $3 per mmbtu, Thai manufacturers pay USD $3 per mmbtu, and Indian manufacturers pay USD $5 per mmbtu, Indonesia's ceramic producers pay an average USD $9.1 per mmbtu for the ceramic production process.