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CABLE INDUSTRY ON THE BRINK OF BANKRUPTCY.

Introduction

The country's cable industry operated only at 50%-60% of their capacity even before the crisis. The condition was much worse when the crisis began to hit the country. A number of producers have been forced to stop operation and some operate much below their capacity.

It is not easy for the domestic market oriented producers to turn to exports market. They need to improve quality first.

The fate of most cable producers depend largely on demand from the electricity and telecommunications projects of the government. Many large telecommunications and electricity projects have been shelved although construction of some of them have been resumed. The state electric utility PLN is still renegotiating with independent power producers on what to do with their power purchasing agreement they have signed and the projects some of which have been half finished.

A number of cable producers closed down

According to the Indonesia association of cable producers (Apkabel), there are 45 cable factories officially registered in the country, but during the crisis that drags on until this year 12 of the producers have been closed down. Among the 12 producers are PT Jayako Murni Abadi, PT Pulung Copper Works, PT Nasio Dutamitra Electric and PT Putera Ometraco Electric. See the following table.

Table - 1 Cable brands and status, 2000
Company Brandname

01. PT Kabelindo Murni Tbk. Kabelindo
02. PT GT Kabel Indonesia Tbk. Kabelmetal
03. PT Sucaco Tbk. Supreme
04. PT Terang Kita Tranka
05. PT Indotrijaya Industries General
06. PT Sumi Indo Kabel Tbk. Sumiindo
07. PT Jembo Cable Company Tbk. Jembo
08. PT Cahaya Angkasa Abadi Focus, Kyoda
09. PT Sinar Merbabu Yamanaka
10. PT Voksel Electric Tbk. Voksel
11. PT Ewindo Ewindo, Sinar
12. PT Phenolic Prima Indonesia Prima, Gold Eterna
13. PT Pudji Tjahaya Golden leave
14. PT Furin Jaya Mitsuba, Super
15. PT Federal Mardhika Corp. Federal, Oyama
16. PT Karya Kabel Taliarta Karyakabel
17. PT Star Impactama Indah Prince cable
18. PT Sinar Plastik Kyoto
19. PT Indoka Jaya Prabu, Utama
20. PT Aries Trijaya Karya Panda, Aries, Samudera
21. PT Citra Mahasurya Industries Citra
22. PT Welsin Lippo Industries Welsin
23. PT Magnakabel Nusantara Magnakabel
24. PT Olex Cables Indonesia Olex
25. PT Anekakabel Ciptaguna Supermax
26. PT Primamujur Perkasa PMP
27. PT Pirelli Cable Indonesia Pirelli
28. PT Starindo Agung Pratama Starco, Erro
29. PT Angka Wijaya Sakti Star, Daichi
30. PT Sinar Intan Putera Union
31. PT Sukses Setia Sutaba
32. PT Inti Metal Eka Perkasa Inti metal, Golden fish
33. PT Niki Gunawan Kabel Toyoda

Company Status

01. PT Kabelindo Murni Tbk. Domestic investment
02. PT GT Kabel Indonesia Tbk. Foreign investment
03. PT Sucaco Tbk. Domestic investment
04. PT Terang Kita Domestic investment
05. PT Indotrijaya Industries Domestic investment
06. PT Sumi Indo Kabel Tbk. Foreign investment
07. PT Jembo Cable Company Tbk. Domestic investment
08. PT Cahaya Angkasa Abadi Domestic investment
09. PT Sinar Merbabu Domestic investment
10. PT Voksel Electric Tbk. Foreign investment
11. PT Ewindo Foreign investment
12. PT Phenolic Prima Indonesia Domestic investment
13. PT Pudji Tjahaya Domestic investment
14. PT Furin Jaya Domestic investment
15. PT Federal Mardhika Corp. Domestic investment
16. PT Karya Kabel Taliarta Domestic investment
17. PT Star Impactama Indah Domestic investment
18. PT Sinar Plastik Domestic investment
19. PT Indoka Jaya Domestic investment
20. PT Aries Trijaya Karya Domestic investment
21. PT Citra Mahasurya Industries Domestic investment
22. PT Welsin Lippo Industries Foreign investment
23. PT Magnakabel Nusantara Domestic investment
24. PT Olex Cables Indonesia Foreign investment
25. PT Anekakabel Ciptaguna Domestic investment
26. PT Primamujur Perkasa Domestic investment
27. PT Pirelli Cable Indonesia Foreign investment
28. PT Starindo Agung Pratama Domestic investment
29. PT Angka Wijaya Sakti Domestic investment
30. PT Sinar Intan Putera Domestic investment
31. PT Sukses Setia Domestic investment
32. PT Inti Metal Eka Perkasa Domestic investment
33. PT Niki Gunawan Kabel Domestic investment



Source: Apkabel/Data Consult/Department of Industry and Trade

Table - 2 Cable producers and capacity, 2000
 Production capacity/year

Producers Power (tons) Telecom (Sckm)

01. PT Kabelindo Murni Tbk. 30,000 1,300,000
02. PT GT Kabel Indonesia Tbk. 17,500 1,000,000
03. PT Sucaco Tbk. 29,000 3,600,000
04. PT Terang Kita 30,000 4,000,000
05. PT Indotrijaya Industries 6,600 --
06. PT Sumi Indo Kabel Tbk. 3,730 1,000,000
07. PT Jembo Cable Company Tbk. 27,814 2,914,000
08. PT Cahaya Angkasa Abadi 1,000 500 ton
09. PT Sinar Merbabu -- 2,400
10. PT Voksel Electric Tbk. 25,800 1,980,000
11. PT Ewindo 1,440 --
12. PT Phenolic Prima Indonesia 900 --
13. PT Pudji Tjahaya 1,000 --
14. PT Furin Jaya 1,250 --
15. PT Federal Mardhika Corporation 750 --
16. PT Karya Kabel Taliarta 120 --
17. PT Star Impactama Indah 1,400 1,000 tons
18. PT Citra Mahasurya Industries 7,800 600 tons
19. PT Walsin Lippo Industries 4,000 4,000
20. PT Olex Cables Indonesia 3,500 4,000 tons
21. PT Anekakabel Ciptaguna 20,000 --
22. PT Pirelli Cable Indonesia 15,200 1,600 tons



Source: Apkabel/survey/Data Consult

According to Apkabel, the country's production capacity now is 300,000 tons a year, and 8 large producers account for 90% of the capacity.

Production down

The shelving of a number of large electricity and telecommunications projects resulted in a decline in demand for cable in the past two years - down from 191,300 tons in 1996 to 137,600 tons in 1007 and to 61,900 tons in 1098. In 1999, the production rose slightly to 63,000 tons. The decline in demand on the domestic market was also caused by the fact that PLN had large stock. In addition PLN started reducing unnecessary spending. Electrical cable dominates 80% of cable production.

Table - 3 Cable production by types, 1995-1999
 Electrical Telephone
 cable cable Total Growth
Year (000' tons) (tons) (000' tons) (%)

1995 118.9 48.5 167.3 --
1996 124.4 67.0 191.3 14.4
1997 97.7 39.9 137.6 -28.1
1998 49.5 12.4 61.9 -55.0
1999 50.5 12.6 63.0 0.2



Source: procesed from various sources by Data Consult

7 Companies dominate industry

Seven large producers manage to survive the crisis. But they have to suffer operational losses, therefore, if the condition continue they are feared to collapse. Six of the 7 companies are publicly listed on the Jakarta Stock exchange. Some of them are in serious financial condition saddled with large debts.

PT Sucaco reported a sharp fall in production of electrical cable from 24,950 tons in 1996 to 5,800 tons in 1998. In 1999, its production began to rise to 8,700 tons. See the following table.

Table - 4 Cable production by companies, 1995 - 1999
 Production of cable ('000 tons)

Producers 1995 1996 1997

1. Electrical cable (tons)
01. Pt Sucaco 18.750 24.950 6.500
02. PT GT Kabel 13.000 14.000 15.000
03. PT Voksel 15.725 18.310 10.320
04. PT Terang Kita 17.500 23.700 6.750
05. PT Jembo Kabel 15.893 19.191 12.963
06. PT Kabelindo 11.258 10.274 9.361
07. PT Sumi Indo Kabel 5.800 3.200 4.900
08. Others 20.974 10.775 31.906
Total 118.900 124.400 97.700

2. Telephone cable (ScKm)
01. PT Sucaco 1,440,000 1,800,000 900,000
02. PT GT Kabel 1,200,000 2,400,000 1,000,000
03. PT Voksel 712,800 891,000 316,000
04. PT Terang Kita 840,000 1,200,000 180,000
05. PT Jembo Kabel 874,200 1,165,000 291,400
06. PT Kabelindo 926,010 1,466,630 899,260

 Production of
 cable ('000 tons)

Producers 1998 1999

1. Electrical cable (tons)
01. Pt Sucaco 5.800 8.700
02. PT GT Kabel 4.000 5.000
03. PT Voksel 7.220 7.705
04. PT Terang Kita 4.500 6.000
05. PT Jembo Kabel 4.207 3.944
06. PT Kabelindo 3.813 1.820
07. PT Sumi Indo Kabel 4.130 2.500
08. Others 15.930 14.831
Total 49.500 50.500

2. Telephone cable (ScKm)
01. PT Sucaco 360,000 540,000
02. PT GT Kabel 270,000 229,500
03. PT Voksel 198,000 277,200
04. PT Terang Kita 40,000 40,000
05. PT Jembo Kabel 145,700 145,700
06. PT Kabelindo 13,013 64,947



Source: Data Consult (Survey)

Exports Up

To make up for a decline in sales on the domestic market, a number of producers have sought to increase exports amid tight competition from major producers in the world. Only producers having contacts abroad could manage to penetrate export market. PT Sumi Indo Kabel, for example, could rely on its partner Sumitomo for access to export market. Its exports have even exceeded sales on the domestic market. Similarly PT Voksel succeeded in earning Rp 12 billion from exports in 1999.

Exports have increased considerably from only 6,000 tons in 1996 to 20,560 tons in 1998 and to 30,680 tons valued at US$ 193.75 million in 1999.

Table - 5 Exports of cable, 1995 1999
 Volume Values

 Increase Increase
 (000 tons) (%) (000 US.$) (%)
Year
1995 4.06 -- 48.22 --
1996 6.01 48.03 105.88 119.58
1997 14.33 138.44 146.6 38.46
1098 20.56 43.48 189.66 29.37
1999 30.68 49.22 193.75 2.16
Average growth (%) 69.79 47.39



Source: CBS

By types, exports are dominated by coaxial cable as shown in the following table.

Table - 6 Exports of cable by types
 000' Ton
 million' US$

HS Number Description 1995

8544.11.110 Rectangular winding wire of copper --
 --

8544.11.190 Winding wire of copper in oth form 58
 831

8544.11.300 Winding wire of copper insulated with 9
 PVC
 55

8544.11.910 Rectangular winding wire of other, --
 cover with paper --

8544.11.990 Other winding wire 5
 92

8544.19.100 Wind wire lacquer/enamel not fitted 5
 with connector of other than copper 96

8544.19.200 Winding wire insulated with PVC of 227
 other than copper
 3,361

8544.19.300 Manganise resistance wire --
 --

8544.19.900 Winding wire of other than copper of 129
 other type
 2,195

8544.20.100 Co-axial cable fitted with connectors
 1,810
 34,023

8544.20.210 Co-axial cable not fitted with
 connectors 57
 insulated with PVC 85

8544.19.290 Other co-axial cable not fitted with 4
 connectors 2

8544.41.000 Elect. Conductor for a voltage < 80 V
 fitted with connector 0
 7
8544.49.110 Elect. Conductor for a voltage < 80 V
 insulated with PVC 63
 1,911

8544.49.190 Other cable for electrical conductor 205
 for a voltage < 80 V
 442
8544.49.910 Other elect. Conductor for voltage
 80 V 13
 insulated with PVC 167

8544.49.990 Other electric conductor < 80 V
 insulated 83
 with other materials
 604

8544.51.000 Elect. Conductor of 80 V < Volt <
 1000 V 47
 with fitted connectors
 678

8544.59.110 Elect. Conductor of 80 V < Volt <
 1000 V 24
 insulated with PVC
 107

8544.59.190 Other cable for electric conductor of 3
 80 V < Volt < 1000 V
 22

8544.59.910 Other electric conductor of 4
 80 V < Volt < 1000 V insulated with 54
 PVC

8544.59.990 Other elect. Conductor 80 V < Volt <
 1000 V 57
 194

8544.60.000 Other electric conductors, for a
 voltage 760
 exceeding 1000 V
 2,578

8544.70.000 Optical Fibre Cables 498
 717

TOTAL 4,061
 48,221
 000' Ton
 million' US$

HS Number 1996 1997 1998 1999

8544.11.110 0 261 11 85
 0 466 53 393

8544.11.190 79 390 4 190
 1160 1699 81 783

8544.11.300 70 141 35 786
 1506 1345 231 3571

8544.11.910 0 0 0 7
 0 0 31 16

8544.11.990 0 55 1774 2260
 0 264 3759 4022

8544.19.100 0 0 1 0
 0 0 0 0

8544.19.200 0 0 0 0
 0 0 0 0

8544.19.300 13 0 16 6
 291 15 204 34

8544.19.900 95 816 3531 1304
 2356 2092 4738 2161

8544.20.100 4,212 4,520 7,286 7,118
 79,917 75,393 128,715 85,886

8544.20.210 -- 99 90 604
 4 833 13,194 30,509

8544.19.290 6 33 68 12
 213 253 130 39

8544.41.000 1 -- 8 230
 14 -- 194 3,598

8544.49.110 206 19 783 3,753
 2,426 203 4,228 19,735

8544.49.190 238 270 302 1,641
 1,481 14,504 1,148 6,068

8544.49.910 4 7 8 18
 193 38 131 219

8544.49.990 207 430 763 262
 3,173 3,340 4,605 2,207

8544.51.000 14 25 9 12
 281 404 42 259

8544.59.110 116 154 483 284
 10,453 1,721 1,263 586

8544.59.190 55 787 1,061 3,771
 262 2,573 2,411 7,996

8544.59.910 -- 4 --
 -- 1,424 54 36

8544.59.990 42 430 472 467
 69 28,620 17,348 6,906

8544.60.000 158 5,264 3,853 6,128
 239 9,629 7,020 9,262

8544.70.000 496 623 7 1,741
 1,839 1,484 84 9,460

TOTAL 6,012 14,328 20,564 30,679
 105,877 146,300 189,664 193,746



Source: CBS

Large exporters include PT Sumi Indo Kable, which exported Rp 214 billion worth of cable in 1999; PT GT Kabel with export valued at Rp44 billion and PT Voksel Rp 123 billion.

Imports down

The financial crisis in 1999 put a brake on import of cable into the country. Imports continued to decline in the past three years from 50,000 tons in 1997 to 17,400 tons in 1999. Previously cables were imported for foreign financed projects. Several types of cables like high voltage transmission cable are not yet produced domestically. Imports, therefore, are needed. Imports from China and Taiwan are mainly because of cheaper prices.

Table - 7 Imports of cable, 1995-1999
 Volume Growth Value Growth
Year (ton) % (000 US$) (%)

1995 33.17 -- 196.73 --
1996 49.77 50.05 267.93 36.19
1997 35.09 (29.50) 304.77 13.75
1998 22.02 (37.25) 138.31 (54.62)
1999 17.42 (20.89) 79.9 (42.23)
 (9.40) (11.73)




Source: CBS

The largest supplier of cable for Indonesia is the United States , followed by Japan, South Korea, Singapore, France and China. The following table shows that the prices of cables imported from China, Taiwan and Malaysia are cheaper. The quality and types of cable imported from the countries are not the same.

Table - 8 Imports of cable by countries of origin, 1995 - 1999
 (ton/US$'000)

 1995 1996 1997 1998 1999

Japan 2,619 3,910 2,045 4,510 1,834
 26,113 39,633 48,170 35,568 11,057

Korea 9,961 6,560 3,831 1,278 1,923
 42,093 35,614 27,714 8,691 11,215

Taiwan 2,288 6,335 1,449 850 629
 10,395 17,038 3,269 2,200 1,046

China 1,324 2,417 1,675 1,334 2,510
 2,318 6,344 2,500 3,028 1,921

Thailand 800 1,719 225 168 179
 3,248 8,735 3,458 403 894

Singapore 538 1,330 2,577 711 2,293
 6,463 7,266 17,021 3,698 12,301

Malaysia 1,756 11,439 2,133 4,296 835
 6,178 31,381 7,315 12,016 1,958

Australia 2,309 3,008 2,166 955 304
 13,799 19,623 19,827 4,758 1,637

USA 2,765 3,890 5,747 3,802 3,090
 18,553 27,654 45,390 20,598 15,426

Canada 851 594 903 622 188
 3,492 2,221 3,389 2,053 644

United Kingdom 69 495 266 344 196
 548 3,536 7,514 5,441 2,556

Netherlands 202 163 2,956 474 90
 4,415 2,831 391,651 6,658 507

France 2,405 3,977 1,442 658 1,707
 25,505 30,619 22,949 8,770 9,301

Germany 1,791 814 2,307 1,042 380
 16,172 16,202 30,199 14,352 4,160

Italy 309 1,758 1,152 136 368
 1,448 7,790 7,888 1,426 2,193

Others 3,496 3,119 5,365 980 1,262
 17,438 19,229 26,894 10,071 5,279

TOTAL 33,174 49,770 35,087 22,024 17,420
 196,730 267,926 304,774 138,305 79,902



Source: CBS

Domestic consumption shrinking

Cable industry is badly hit by the crisis. Cable consumption in the country dropped from 235,000 tons in 1996 to only 50,000 tons in 1999. The domestic consumption could not support development of cable industry.

Table - 9 Estimate of cable consumption, 1995 - 1999
 Production Import Exports
Year (000 tons) (000 tons) (000 tons)

1995 167.3 33.2 4
1996 191.3 49.8 6
1997 137.6 35.1 14.3
1998 61.9 22 20.6
1999 63.1 17.4 30.7

 Consumption Growth
Year (000 tons) (%)

1995 196.5
1996 235.1 19.64
1997 158.4 -32.62
1998 63.3 -60.04
1999 49.8 -21.33



Source: data processed/Data Consult

Those managing to survive the crisis, operate at only 10%-20% of their capacity. Therefore they suffered large operational losses in the past 2 years. The decline in consumption came mainly as a result of the shelving of large electricity and telecommunications projects. The condition was worse with the slump that hits the property sector mainly housing development.

The types of cable consumed in the country vary including ones for electricity, telecommunication and electronic sectors. Electrical cables include low, medium and high voltage cables. Low voltage cables generally has a voltage of up to 1 KV with PVC insulation. Medium voltage cables have a voltage of from 1 KV to 35 KV with XLPE insulation and aluminium conductor.

Electrical cables dominate 80% of cable market in the country and telephone cables have a share of 14%.

Table - 10 Estimate of cable market in volume by types, 1995 - 1999
 (000 tons)

Year Electrical Telephone Others Total

1995 139.52 39.30 17.69 196.5
1996 152.82 58.78 23.51 235.1
1997 112.46 31.68 14.26 158.4
1998 50.64 9.50 3.17 63.3
1999 39.84 7.47 2.49 49.8



Source: Data Consult

Market segmentation

Cable markets include

A. Domestic market which consists of:

1. Public sector:

a. PLN subsector

b. Telecommunications suchsector

- Telkom

- Joint operation partner (KSO)

- Indosat

c. Kepres market 18/2000

2. Private sector:

a. Open market such as Kenari market and Senen market

b. Property market

c. Industry market such as electronic industry (TV, refrigerator, fan, etc)

d. Automotive, cellular cable TV and other such industries

e. Other markets such as mining industry, etc.

B. Export market:

a. Open market

b. Captive market

- Open export market is one to which every suppliers are free to join in competition

- Captive market is one having priority to accept supplies from certain producers such as in the case of PT Siemens Indonesia which has buyers among its affiliates abroad.

Prospects and opportunity

Apkabel has said increase in demand from buyers among the public sector (PLN and Telkom) could not yet be expected in the next 2 years. The sector is expected to revive only in the next 3 years and normal condition as in precrisis time would come only in the next 5 years. The prospects, however, are good encouraging in the private sector. So far the trend has been positive. In the next 2 years demand from the private sector is expected to return to the normal level of pre crisis time.

Apkabel estimates that concrete recovery is expected to come in 2001. Development of cable industry will depend much on the progress made in the development of the electricity and telecommunications sectors. PLN itself has set development targets in the next 5-10 years. See the following table.

Table - 11 PLN's transmission and distribution projects
 Transmission

 Cable Sub-station
Completion (Kmc) (MVA)

1. In 2000

 1.1. Java/Bali 1.002 2.720
 1.2. Outside Java/Bali 2.657 490
 1.3. Subtotal 3.659 3.210

2. After in 2000

 2.1. Java/Bali 3.978 9.800
 2.2. Outside Java/Bali 5.889 1.110
 2.3. Subtotal 9.867 10.910

3. Total

 3.1. Java/Bali 4,080 12,520
 3.2. Outside Java/Bali 8,540 1,600
 3.3. Subtotal 13,526 14,120

 Distribution

 Trafo
 Cable distribution
Completion (Kmc) (MVA)

1. In 2000

 1.1. Java/Bali 4.138 277
 1.2. Outside Java/Bali 6.581 97
 1.3. Subtotal 10.719 374

2. After in 2000

 2.1. Java/Bali n.a. n.a.
 2.2. Outside Java/Bali n.a. n.a.
 2.3. Subtotal n.a. n.a.

3. Total

 3.1. Java/Bali 4,138 277
 3.2. Outside Java/Bali 6,581 97
 3.3. Subtotal 10,719 374



Source: PLN

The prospects of demand for cable from the telecommunication sector is reflected in PT Telkom's plan to expand its capacity built by itself and its KSO partners.

Table - 12 Telephone development plan of Telkom & KSO, 2000 - 2001
 (000 line units)

Year Telkom KSO Indonesia

1999 3,958 3,471 7,429

2000 4,057 3,679 7,736
2001 4,260 3,974 8,234
2002 4,686 4,371 9,057
2003 5,272 4,917 10,184
2004 6,062 5,655 11,717
2005 7,123 6,786 13,909
2006 8,191 7,974 16,165
2007 9,174 9,164 18,343
2008 10,092 10,316 20,408
2009 11,101 11,605 22,706
2010 12,211 12,766 24,977



Source: Data Consult

Based on development projects mentioned above, cable demand on the domestic market in the next 5 years is estimated as follows:

Table - 13 Estimate of demand for cable by types, 2000 - 2004
 Power Telecommunication

Year 000' ton Up 000 ton Up

2000 41.83 5% 7.84 5%
2001 50.20 20% 9.41 20%
2002 70.28 40% 14.12 50%
2003 105.42 50% 19.77 40%
2004 137.04 30% 25.70 30%

 Other Total

Year 000' ton Up 000' ton Up

2000 2.61 5% 52.29 5.00
2001 3.40 30% 63.01 20.50
2002 5.10 50% 89.49 42.03
2003 7.65 50% 132.83 48.42
2004 9.94 130% 172.68 30.00



Source: Data Consult

The table shows that demand projected at 172,700 tons in 2004 is still smaller than demand in 1996. Competition, therefore, is expected to remain tights.
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Title Annotation:statistical review of industry
Comment:CABLE INDUSTRY ON THE BRINK OF BANKRUPTCY.(statistical review of industry)
Publication:Indonesian Commercial Newsletter
Article Type:Industry Overview
Geographic Code:9INDO
Date:Oct 24, 2000
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