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Ceramic industry facing problem over limited supply of gas.

Fast growth has been recorded for ceramic industry in Indonesia over the past several years on strong demand for ceramic materials especially from fast growing property sector. The property sector needs various ceramic products like ceramic tiles, sanitary ware, etc. The country's ceramic production capacity and production have increased over the past several years to keep pace with the growing demand. The industry is expected to grow faster still with a number of producers planning capacity expansion. Meanwhile, a number of new companies are expected to start business in this sector.

The country's production of ceramic tiles totaled 3.3 million tons in 2010, up 3 percent to 3.4 million tons in 2011. The country's production of sanitary ware rose to 57,000 tons in 2011 from 56,000 tons in 2010. According to according to
prep.
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

3.
 the association of Indonesian ceramic producers (Asaki), the market value of ceramic goods in the country was Rp 17 trillion in 2011, up from Rp14.7 trillion in the previous year.

The country's ceramic industry, however, is still facing uncertainty over availability of gas supply. The survival of ceramic industry depends on the availability of gas supply. In 2011 gas needed by the industry reached 100 mmscfd -120 mmscfd, but supply was only 50 mmscfd from the state gas distributor PT Perusahaan Gas Negara and the state oil and gas company PT Pertamina. The industry also still depends on imports for part of its basic materials.

The industry is already confronted with tougher marketing problem with the influx of cheap Chinese ceramics Chinese ceramics is a form of fine art developed since the dynastic periods. China has always been richly endowed with the raw materials needed for making ceramics. The first types were made about 11,000 years ago, during the Palaeolithic era.  flooding the domestic market. Call for strict compliance with the National Standard is growing to prevent entry of cheap Chinese product not up to standard in quality.

The country's ceramic goods producers also still face difficulty in securing bank loans as investment in the industry is still considered a high risk venture.

CAPACITY STAGNANT

The products of ceramic industry in Indonesia include ceramic tiles, sanitary ware and tableware.

Currently, Indonesia is the sixth largest ceramic producer in the world. It has 60 companies producing ceramics including 42 tile producers and 15 producers of tableware and 3 producers of sanitary ware.

From 2010 to 2011, the country's ceramic industry was almost unchanged in capacity. The capacity for ceramic tiles grew only 1.1 percent to 5,290 tons in 2010 from 5.232 million tons in 2009. The production capacity for sanitary ware grew 1.2 percent to 59,000 tons in 2009 from 58,300 tons in 2008. The capacity did not change in 2011.

PRODUCTION UP AGAIN

After a setback in 2009, the country ceramic production grew in the following years. In 2009, the country's ceramic production shrank shrank  
v.
A past tense of shrink.


shrank
Verb

a past tense of shrink

shrank shrink
 16.7 percent to 3.4 million tons per year from 4.11 million tons in the previous year. The decline in production was recorded mainly for ceramic tiles and tableware. The decline in production followed weak demand both on the domestic and international markets especially in the country's traditional markets Europe and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Producers were forced to cut working shifts from normally three to 2 or 2.5 shits per day.

The decline in the production rate resulted in inefficiency. It was estimated that around 80 percent of the country's ceramic producers cut operating hours of their factories by 4 hours per day on the average in 2009.

Attempts to expand exports to non traditional markets such as to other Asian countries and Africa made no much headway to offset a decline in sales to crisis hit Europe and the United States. Exports to new markets made up only around 5 percent -8 percent of the country's total exports.

In 2010 and 2011, the production grew to 3.468 million tons and 3.481 million tons respectively. According to ASAKI, the country's ceramic sales were worth Rp17 trillion in 2011, up from Rp14.7 trillion in 2010. In 2012, the market value is forecast to rise to Rp 20 trillion. The increase followed the capacity expansion by some producers like Arwana. In 2012, the country's production of ceramic tiles is forecast to rise 8 percent to 3.76 million tons.

The ceramic market value is expected to increase next year if the government could guarantee gas supply for ceramic factories and improve infrastructure.

Sales on the domestic market could still be increased especially for medium to low scale producers. The country's per capita [Latin, By the heads or polls.] A term used in the Descent and Distribution of the estate of one who dies without a will. It means to share and share alike according to the number of individuals.  consumption of ceramics is relatively low at 1.1 sq. meters as against Singapore's per capita consumption of 3 sq. m. per year.

MAIN PLAYERS

PT. Mulaikeramik Indahraya

PT. Muliakeramik Indahraya (PT. MI) of the Mulia Group started operation in 1992. Currently it has a production capacity of 62 million tons of ceramics per year. Its factory is located over a 200 hectare hectare (hĕk`târ, –tär), abbr. ha, unit of area in the metric system, equal to 10,000 sq m, or about 2.47 acres.  plot of land in Cikarang, Bekasi, West Java The integrated factory include 4 units of floor tile production facility, 2 units of wall tile production facility, 1 unit of Third Firing and 1 unit of Trim.

The products of PT. MI bear the brands of Mulia, Accura, Maxima, Prisma, Legend, Crystal, Magna, Ceramica Europa, and Signature, with various variants, designs, colors, seizes, and models. Currently, the company has exported part of its production to 50 other countries in Asia, Africa, North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , etc.

PT. Arwana Citra Mulia Tbk

PT. Arwana Citra Mulia Tbk (PT. ACM (Association for Computing Machinery, New York, www.acm.org) A membership organization founded in 1947 dedicated to advancing the arts and sciences of information processing. In addition to awards and publications, ACM also maintains special interest groups (SIGs) in the computer field. ) came on stream in 1995. PT. ACM has three factories one each in Pasar Kemis of Tangerang, Cikande of Serang Se`rang´

n. 1. The boatswain of a Lascar or East Ondian crew.
 Gresik of East Java East Java (Indonesian: Jawa Timur) is a province of Indonesia. It is located on the eastern part of the island of Java and also includes neighboring Madura and Bawean islands. . The first two factories supply ceramics to market in western Indonesia and the one in Gresik supplies the materials for eastern part of the country.

Arwana has expanded its factory in Serang. The expansion unit started operation in February, 2012.

PT. ACM plans to expand its total production capacity from 41.8 million sq. m. to 49.3 million sq. m. with a new factory to be built in Sumatra next year.

The main market target of Arwana is the middle to low class market segment. Its exports make up only 5 percent of its total sales. Its products bear the brands of Embossed em·boss  
tr.v. em·bossed, em·boss·ing, em·boss·es
1. To mold or carve in relief: emboss a design on a coin.

2.
, Warna Marmer, Plain, Granity, Strata, Rustic, Fancy Wood, Dekoratif Fancy and Subway.

PT Keramika Indonesia Assosiasi Tbk

PT Keramika Indonesia Asosiasi, Tbk (PT. KIA KIA  
n.
A member of the armed services who is reported killed during a combat mission.



[k(illed) i(n) a(ction).]
) was originally known with the name of CV Keramika Indonesia which was established in 1953 in Tanjung Pandan Pandan can refer to:
  • Pandanus amaryllifolius, a plant which yields the pandan leaf used widely in Southeast Asian cuisine
  • Pandan cake, a green dessert made with pandan
  • Pandan, Antique, a municipality in the Philippines
 Belitung. In 1968, the name was changed with PT. KIA.

PT. KIA expanded its business by building a factory in Cileungsi, West Java in 1995, and another in Karawang in 1997 with a capacity of 11 million sq.m m. per year.

With the new majority shareholder SCG SCG Serbia and Montenegro
SCG Srbija I Crna Gora (Servian: Serbia and Montenegro)
SCG Sydney Cricket Ground
SCG Service Canadien des Glaces (Canadian Ice Service)
SCG superior cervical ganglion
 Building Materials Building materials used in the construction industry to create .

These categories of materials and products are used by and construction project managers to specify the materials and methods used for .
 Co Ltd, a subsidiary of Siam Cement The Siam Cement Public Company Ltd. is a large cement company in Thailand. It is listed on the Stock Exchange of Thailand (trading symbol: SCC).

It was founded under the Royal Decree of King Vajiravudh in 1913.
 Group of Thailand which acquired a 93.4 percent stake in PT. KIA in June 2011, PT KIA will modernize mod·ern·ize  
v. mo·dern·ized, mo·dern·iz·ing, mo·dern·iz·es

v.tr.
To make modern in appearance, style, or character; update.

v.intr.
To accept or adopt modern ways, ideas, or style.
 its production technology and improve the design of its products.

Currently PT. KIA has three factories located in West Java and East Java with a total production capacity of 27 sq. m. of ceramic tiles both floor and wall tiles, and 23 million pieces of roof tiles and accessories. Siam Cement plans to increase the production capacity of KIA to 31 million sq. m. soon.

The products of KIA bear the brand of KIA for high class market segment, Impresso for middle class products and Spectra for lower class market segment. There are also KIA Roof and KIA Brick for ceilings. The production of PT. KIA has been exported to various countries including the Europe and the United States and other Asian countries.

EXPORTS

The country's exports of ceramic goods have tended to decline over the past several years. The sharpest fall in exports was recorded in 2009, when exports shrank 51.3 percent to 381,900 tons from 425,000 tons in 2008. In 2010, exports rose slightly to 398,400 tons on improved condition of the economy of destination countries.

The main export destinations of the country's ceramic exports have been the United States and Europe. Exports to the United States made up 12 percent of the country's total exports and Europe accounted for 8 percent, Australia five percent, and other southeast Asian countries accounted for the rest.

Exports have been dominated by tiles accounting for 89.9 percent, followed by house ware 7.3 percent, and sanitary ware 2.8 percent.

COMPETITION AGAINST IMPORT PRODUCTS

In the past five years, ceramic imports have fluctuated. Imports plunged 31.4 percent to 154,700 tons in 2009 from 225,600 tons in the previous year. In 2010, imports rose again 17.8 percent to 182,200 tons.

Major ceramic producers in the world include China, Italy, Spain, Turkey, and Brazil. China is the main competitor for local producers on the domestic market. Chinese products are cheaper flooding the domestic market. However, generally local products are quite competitive especially in quality.

The domestic producers are protected by the government regulation putting ceramics in sensitive list with import duty of 20 percent -30 percent until 2018. The high import duties are slapped to prevent growing imports both legally and illegally.

The protection on quality is yet to come until the imposition of SNI (1) (Subscriber Network Interface) The point of interface between the customer's equipment (CPE) and a communications service from a common carrier.

(2) (SNA Network I
 (Indonesian National Standard) on ceramic tiles, sanitary ware and tableware.

SHORTAGE IN GAS SUPPLY

Ceramic industry is a large consumer of gas in the process of production especially in the process of burning the feldspar feldspar (fĕl`spär, fĕld`–) or felspar (fĕl`spär), an abundant group of rock-forming minerals which constitute 60% of the earth's crust.  and silica sand, the basic materials. Gas requirement for the industry is expected to continue to increase to follow the capacity expansion of the industry. Capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens.  of ceramic industry in 2011 was 62.9 percent and it is expected to increase in the coming years.

In the past four years, the country's ceramic producers have complained about shortage in gas supply. According to Asaki gas needed by the ceramic sector in 2011 reached 100 mmscfd to 120 mmscfd. The gas requirement rose 10 percent a year to follow the expansion of the capacity of the industry. However, only 50 percent of the requirement has been met. It would take a year to increase gas supply for the industry.

The supplier of gas for the industry is PT. Perusahaan Gas Negara (PGN PGN Portable Game Notation (chess)
PGN Procuraduria General de la Nación (Spanish)
PGN Philadelphia Gay News
PGN Parameter Group Number
PGN Phi Gamma Nu (business fraternity) 
). Gas is bought on contract. Ceramic industry and PGN has contract for 2 years. PGN will supply up to 68 mmscfd-75 mmscfd.

Limited availability When customers of the PSTN make telephone calls, they commonly make use of a telecommunications network called a switched-circuit network. In a switched-circuit network, devices known as switches are used to connect the caller to the callee.  of gas distribution infrastructure adds to the problem. The government, therefore, plans to build receiving terminals for gas from LNG LNG (liquefied natural gas): see under natural gas.  producers such as Tangguh and Donggi Senoro.

The fact that PGN demand payment for its gas in US dollar is also a problem for ceramic producers as their earning is dominated by rupiah ru·pi·ah  
n. pl. rupiah
See Table at currency.



[Hindi rupay, rupiy
. They often suffer loss in foreign exchange.

PT. PGN sells gas in dollar to anticipate risk in falling value of rupiah as a risky currency. PGN also buys gas in US dollar.

The government has been urged to cope with the problem faced by ceramic producers in foreign exchange losses.

CERAMIC PRODUCERS COOPERATE WITH INSURANCE FIRMS

Ceramic producers buy gas from PGN on contract. The ceramic producers, therefore, are required to pay for the gas under contract. Some of the ceramic producers have cooperated with insurance companies to guarantee payments for the gas under contract. Among the companies are PT Colorobia Indonesia, PT Ika Maestro (1) (Maestro NT) An earlier name for scheduling software for Windows NT from Tivoli Systems, Inc. When IBM acquired Tivoli in 1996, the program was renamed IBM Tivoli Workload Scheduler. , PT Perkasa Primarindo, PT Primando Argatile, and PT Keramik Indonesia Asosiasi Tbk (KIA Grup). The five ceramic producers have signed a two year contracts with Asuransi Sinarmas an insurance company effective from 2011 to 2012. The contracts will be more assured of payment for its gas. PGN would demand payment from the insurance company in case of delay or failure in payment from the ceramic producers. ASAKI said all ceramic producers grouped in the association will have similar contracts with Asuransi Sinarmas.

INVESTMENT BRISK

Despite uncertainty in gas supply, some producers plan expansion prompted by growing demand on the domestic market.

PT Matahari Prima Sukses in Surabaya built a sanitary ware plant with a capacity of 25,000 pieces per month. The factory came on line April 2010.

Meanwhile, foreign investors have also planned to invest in this sector. Two ceramic companies from Taiwan, Sunpower International Ceramics and Kylos Resources planned to build factories with a total investment of US$57.5 million in 2011. Sunpower International Ceramics wanted to build a factory with a capacity of 30,000 sq. m. per day. Kylos Resources wanted to build one with a capacity of 85,000 sq. m. per day. The projects of the two companies would cost around US$57.5 million on assumption that US$15 million are needed to build a production line with a capacity of 10,000 sq. m. per day.

Apart from investment in the downstream sector of the industry, investment in the upstream sector is also pressing to reduce dependence on import for basic materials. Currently around 30 percent of ceramic basic materials are still imported especially for basic material for glazed glaze  
n.
1. A thin smooth shiny coating.

2. A thin glassy coating of ice.

3.
a. A coating of colored, opaque, or transparent material applied to ceramics before firing.

b.
 ceramics. Imports have been made from various countries including India, Italy, Spain, and China.

Indonesia has large reserves of minerals that could be processed into raw materials to feed ceramic industry like silica alumina alumina (əl`mĭnə) or aluminum oxide, Al2O3, chemical compound with m.p. about 2,000°C; and sp. gr. about 4.0. , zircon zircon

Silicate mineral, zirconium silicate, ZrSiO4, the principal source of zirconium. Zircon is widespread as an accessory mineral in acid igneous rocks; it also occurs in metamorphic rocks and, fairly often, in detrital deposits.
, felspahr and ballclay. The raw materials are found in abundance in Kalimantan, Sulawesi and part of Java.

A number of foreign compani8es already investing in the processing of the raw materials include Veromas Dinamika and Sibelco Mineral Asia. There are also 20 Chinese trading companies trading ceramic basic materials in the country.

In 2010, a number of business players in this sector expanded capacity such as PT Puri Kemenangan Jaya, the producer of ceramic with the brand of Centre. The company expanded the capacity of one of its factories in Cileungsi, Bogor with an investment of Rp300 billion. The expansion was part of its plan to expand the capacity of two of three factories in Cileungsi, Bogor. The company planned to expand the capacity by 600,000 sq. m per month to bring its total capacity to 12.6 million sq. m. per month.

PT Arwana Citramulia Tbk has invested Rp48 billion to increase the production capacity of its factory in Cikande, Serang, Banten, from 17 million sq.m. per year to 19 million sq. m. per year. The new production line was named Plant 2C Extention with a capacity of 2 million sq. m. per year. The production unit is to start operation in the last quarter of 2012 to produce wall ceramics measuring 20 cm x 25 cm.

In 2011 PT Claytons Indonesia planned to build a ceramic factory with a production capacity of around 6 million sq. m. per year. Hocheng Corporation (HCG HCG, hCG human chorionic gonadotropin.

HCG
abbr.
human chorionic gonadotropin


Human chorionic gonadotropin (hCG) 
) from Taiwan also plans to build a ceramic factory with a production capacity of around 9.6 million sq. m. per year. Each of the new factories is at least US$30 million.

There is also Guangdong Oulu Sanitaryware Co Ltd from China planning to build a ceramic factory in Tangerang.

BANKS LESS INTERESTED IN INVESTING IN CERAMIC INDUSTRY

Expansion of ceramic industry needs financial support from the banking sector but banks have shown little interest in venturing in the sector.

Based on data from Bank Indonesia Bank Indonesia is the central bank of Indonesia. Its current governor is Burhanuddin Abdullah. History
Bank Indonesia was founded on July 1, 1953, in the Sukarno era - from the nationalization of De Javasche Bank, a Dutch bank dating from colonial times.
, by the end of 2009, banks' outstanding credits in the ceramic industry totaled Rp2.25 trillion, or less than 6.7 percent compared to Rp2.41 trillion in 2008. The credits were only 0.18 percent of the total outstanding credits of Rp1,437 trillion recorded by all banks in the country that time.

In fact non performing credits in the ceramic industry have improved from 15.7 percent to 12.36 percent in 2009. The non performing loans have discouraged bank to provide credits for ceramic producers.

The NPL 1. NPL - New Programming Language. IBM's original (temporary) name for PL/I, changed due to conflict with England's "National Physical Laboratory." MPL and MPPL were considered before settling on PL/I. Sammet 1969, p.542.
2.
 also caused higher cost of building ceramic factories in the country as banks agree to offer credits on higher interest because of the investment risk.

The interest rates on credit for the manufacturing sector in the country average 11.5 percent per year, which is relatively high compared to 4 percent in Taiwan. The country's ceramic industry needs capital credits of at least Rp5.4 trillion this year or twice the credits of Rp2.7 trillion provided in this sector in 2009.

In 2010, working capital credits provided by banks in this sector were less than 1 percent or only Rp2.7 trillion. This year the industry hopes to receive credits totaling Rp5.4 trillion.

Credits are needed to replace old machines. Machines made in 1993 need replacement to be more efficient. Working capital is also needed for research and development.

THE PROSPECTS REMAIN ENCOURAGING

The ceramic industry in the country still has good prospect for expansion. In fact capacity expansion has continued and new investors are building factories. Production also is growing to keep pace with the market demand which is growing especially from the property sector. The production rose to 3.48 million tons in 2011 from 3.46 million tons in the previous year.

Exports, however, have declined in the past two years as a result of the global crisis. The domestic economy has expanded, however, that contributed to offsetting the setback in exports.

The expansion of the domestic market has also attracted foreign producers resulting in the flooding of domestic market with imported products. The competition on the domestic market is sharper. The domestic producers have to meet the condition by improving their competitiveness both in price and quality especially facing products from China.

Indonesia has big potentials to develop ceramic industry with the main raw material easily available. The industry, however, has not sufficiently attracted big investment. Development of the upstream sector of the industry to reduce dependence on imports for basic materials would improve the competitiveness of the country's ceramic industry. So far investments have been largely in the downstream sector.

The industry has not succeeded in convincing the banking sector into providing financial support because of the high NPL. The difficulty will continue as long as the NPL is high.

The rapid growth of the property sector especially development of new high rise buildings including office buildings, apartment towers and shopping malls as well as housing projects should improve the condition of the country's ceramic industry. In 2012, the country's ceramic production is forecast to grow 8 percent to 3.760 million tons.

Lingering problem over shortage in gas supply, however, remains a concern. The industry need large supply of gas, but supply has always fallen short of requirement. The country is one of the world's largest producers of natural gas but the country exports most of its gas in liquefied natural gas liquefied natural gas: see under natural gas.
Liquefied natural gas (LNG)

A product of natural gas which consists primarily of methane. Its properties are those of liquid methane, slightly modified by minor constituents.
 (LNG) form leaving little for domestic market. The country is still bound by long term contracts such as with Japan and South Korea. In addition, producers choose to export their production as the prices are better in international market.
Table-25
Production keramik nasional 2007-2011

(tons)

Year     Ceramic    Sanitary   Tableware     Total       Growth
          tiles       ware                              (percent)

2007    4,635,789    57,523      59,179    4,752,491           --
2008    4,015,323    57,369      40,000    4,112,692        -13.5
2009    3,330,000    56,104      40,800    3,426,904        -16.7
2010    3,370,572    56,104      41,616    3,468,282          1,2
2011    3,382,375    57,010      42,525    3,481,910          0.4

Sources: Agrochemical statistics of the industry ministry 2009

Table-26
Indonesia's ceramic exports, 2007-2010 (tons)

Year      Ceramic    Share    Sanitary    Share
          tiles       (%)       ware       (%)
          (tons)               (tons)

2007      398,851     89.6     17,187      3.9
2008      381,438     89.7     17,665      4.2
2009      344,144     88.7     11,853      3.1
2010      357,988     89.9     11,107      2.8

Year     Tableware   Share      Total     Growth
          (tons)      (%)      volume      (%)
                               (tons)

2007      29,038      6.5      445,076       --
2008      26,146      6.1      425,249     -4.5
2009      25,909      6.7      381,906    -10.2
2010      29,299      7.4      398,394      4.3

Sources: Agro-chemical Styatistics of Industry Ministry 2010

Table-27
Indonesia's imports of ceramic goods, 2007-2010

(tons)

Year     Ceramic    sanitary    Tableware     Total      Growth
          tiles       ware

2007     150,209      6,717       24,085     181,011         --
2008     190,227      9,624       25,713     225,564       24.6
2009     123,427      8,474       22,817     154,718      -31.4
2010     150,416      8,414       23,378     182,208       17,8

Sources: Agro-chemical Statistics of Industry Ministry 2010

Table-28
New investments and expansion projects, 2010-2012

Name of company     Location       Capacity      Investment   Operation
                                  (per year)

PT Puri            Cileungsi,   Ceramic-7,2      Rp 300         2010
Kemenangan Jaya    Bogor        million sq. m.   billion

PT Matahari        Surabaya,    Sanitary ware    N.a            2010
Prima Sukses       East Java    -300,000 pcs

PT. Claytons       N.a          Ceramic-6,0      US$ 30         2011
Indonesia                       million sq. m.   million

Hocheng            N.a          Ceramic-9,6      US$ 48         2011
Corporation                     million sq. m.   million
of Taiwan

PT. Arwana         Cikande,     Ceramics-2       Rp 48          2012
Citra Mulai Tbk    Serang       million sq. m.   billion

Sunpower           N.a          Ceramics-10,8    US$45          2012
International                   million sq. m.   million
Ceramics of
Taiwan

Kylos Resources    N.a          Ceramics-30,6    US$127.5       2012
of Taiwan                       million sq. m.   million

Sources: ICN processed
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Title Annotation:Industry Profile
Publication:Indonesian Commercial Newsletter
Date:Apr 1, 2012
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