Ceramic tile industry reviving. (Industry Profile).
The subsidy provided by the government for low cost houses contributed to the revival of the construction industry.
The revival of the construction industry is followed by an increase in demand for ceramic tiles. In 2000, ceramic tile consumption in the country rose 10% to 153 million sq.m. or almost level with the consumption of 159.3 million sq.m. in pre crisis year of 1996.
The improvement in the demand for ceramic tiles was proportional with the increase in the sales of cement in the country lately. KIA, a major producer of ceramic tiles in the country reported sales valued at Rp147 billion in December or an increase of 39% from the year before.
In 2001, its sales rose even higher by 42% to Rp 209 billion. KIA, therefore, was encouraged to reoperate its ceramic tile plants in Cileungsi and Gresik producing roof tiles.
PT Saranagriya Lestari Keramik, which is known as a producer of floor tiles with the brands of Milan, SuperMilan and Hercules, plans expansion to increase its capacity by 40% to 4.5 million sq.m. from 2.7 million sq.m. a year in February this year.
Meanwhile, there were four new investors including two foreign companies (PMA), invested in this sector in the past two years.
Producers have increases exports lately to make up for a decline in sales on the domestic market. In 1999, exports surged three times higher. In 2000 exports totaled 313,379 tons or an increase of 15.2% from the year before.
Knowing that production cost is low in the country buyers abroad asked for a lower price than the prevailing levels in international market.
The raw material is available in abundance in the country to produce ceramics, and the labor cost is relatively cheap.
Meanwhile per capita consumption of ceramics is still low, among the lowest in ASEAN. The prospects, therefore are good for the industry in the country.
Ceramic goods produced in the country include tableware, ceramic tiles and ceramic craft. Ceramic tile industry grows faster followed by ceramic tableware industry.
Ceramic is produced from a mixture of non metal mining materials processed under high temperature. The materials include clay, kaolin, feldspar, quartz sand and other auxiliary materials.
In Indonesia, the types of ceramics produced in large scale are wall tiles, floor tile, bricks and roof tiles.
Basically ceramic tiles have standard sizes but they are different in the hardness of their surfaces. Ceramic tiles include light duty/traffic used for house floors, semi medium and medium duty/traffic used for building with high frequency of human traffic such as shopping centers, hospitals and hotels.
The process of producing ceramic tiles starts from processing of raw materials, forming of body through pressing, production of glazing line, printing and burning in kiln.
Glazing process could be made before burning or after burning by dipping the tiles and through spraying.
By their surface ceramic tiles could be divided into two types - glazed tile and unglazed tiles. Almost all producers of ceramic tiles in the country produce the two types. The designs include plain and textured. They have various colors, bright and dark.
The sizes range from 200 cm2 to more than 900 cm2 in surface. Granito ceramic is a new type used mainly for luxurious houses and multistorey buildings. Granito tile is a ceramic tile entirely made of the same material with surface glazed. Granito, therefore, needs high quality raw material.
Granito tiles, which are superior over other ceramic tiles such as marble tiles and natural granite tiles, are porcelain tiles, which are harder with low water absorbability, tougher, not easily scratched and their colors not changing easily.
The main basic materials for granito tiles are feldspar, clay, pigment and silica sand. Clay is supplied locally.
Imported basic materials
Clay, feldspar and kaolin are available easily in the country but the quality is low. Therefore, many producers of ceramics chose to import them.
Feldspar for granito is imported from Turkey and clay is partly imported from Ukraina.
Pigment is imported from Spain. Silica is supplied mainly locally. Kaolin is produced in the country is low in quality.
Imports of kaolin fluctuate but tend to rise. In 2000, imports peaked at 145,253 tons valued at US$ 35 million an increase of 15.9% from 125,343 tons in 1996 or before the crisis hit the country.
Kaolin is imported mainly from the United States as shown in the following table.
Investors have shown no much interest in ceramic industry lately as a result of the crisis. The country's production capacity for ceramic products, therefore, has remained unchanged from around 230,000 sq.m. a year
There are 43 registered producers but only 35 of them are actively operational. Others stopped operation as a result of the crisis that began in 1997.
Almost all producers of ceramic tiles produce floor tile for which the country has an annual capacity of 167,300 sq.m. or 72.7% of the total capacity for ceramic tiles.
With the production capacity, Indonesia is the fifth largest producer of ceramics in the world after China with an annual capacity of 1.2 billion sq.m., Italy 800 million sq.m., Spain and Brazil. The world's ceramic production capacity is 3.8 billion sq.m.
The largest producer of ceramic tiles in Indonesia is PT Keramika Indonesian Asosiasi (KIA). The company started operation in 1970 as a PMA with factory in Tanjung Pandan, Belitung. Since 1992, the status of the company became PMDN.
The subsidiary of the Arya Upaya group (Ongko Group) was forced to suspend operation of its Cileungsi and Gresik factories when the crisis was at its worst. KIA has an annual production capacity of 24 million sq.m. of ceramic tiles from its Belitung and Cileungsi factories.
KIA reported net sales valued at Rp 147 billion in 2000 or an increase of 39% from 1999. The company, however, still posted a net loss of Rp 538 billion mainly because of large loss on foreign exchange, which contributed Rp 450 billion to the total loss.
In 2001, it reported a 42% rise in net sales to Rp 209 billion. With operating profit of Rp 35 billion, the company was prompted to reoperate its Cileungsi and Gresik roof tile factories.
KIA restructured a debt of Rp 100 billion in 2001. Around 90% of the debt were owed to a syndicate of foreign banks including Royal Bank of Scotland, Credit Lyonnaise and Brussel Lambert.
The rest or 10% were owed to IBRA taken over from Bank Umum Nasional, Bank Tamara, Bank Exim and Bank Mashil.
The original shareholders included Hock Soon & Co from Singapore (46.2%) and Kaharuddin Ongko (36%), Diah Koswara (14.8%) and Darwin Thiohardi (3%).
After the change in status into PMDN PT Ongko Multi Corpora became the majority shareholder with a stake of 67.53%, Kaharuddin a 3.06% owner and the remaining 29.41% held by investing public.
PT Mulia Keramik Indahraya of the Mulia Group, has an annual capacity to produce 29 million sq.m. of floor tiles and 17 million sq.m. of wall tiles using the brand name of Mulia Keramik.
Asia Victory Industries (AVI) is set to grab a market segment of middle class consumers with its new product Platinum Magna Series, following Asia Tiles and Platinum. Its products are sold at a price range of Rp 15,000 to Rp 70,000 oer sq.m. Around 30% of its production of Platinum Magna Series is exported.
PT Saranagriya Lestari Keramik produces floor tiles with brand names of Milan, SuperMilan and Hercules. It has succeeded in increasing exports such as to the United States, Australia, Canada and South Korea. The company has an annual capacity of 4.5 million sq.m. In 2001, the company operated at full capacity. Therefore, it needs expansion.
PT Angsa Daya is a PMDN of the Kedaung Group, which is better known as a producer of glassware. The company came on line in 1977 using the brand of IKAD. It also produces tableware with the brand of IKG, brick fire roof, granite and mozaic tiles.
PT Senrico Djaja Marmer Industries started operation in 1979. Its ceramic tile factory is integrated with sanitary ware and table ware production facilities. The company, which is based in Jakarta, has an annual capacity of 10.2 million sq.m.
PT Metropole Megah and PT Satya Raya Keramindo Indah are both subsidiaries of the Satya Djaja Raya Group, which has core business in timber industry. See the following table for more details.
Production growing faster
The country's production of ceramic tile dropped 12.2% to 139.3 million sq.m. in 1997 as a result of the crisis. Until 1997, the industry remained in the doldrums, but demand for ceramic tiles began to rise as repairs began for some of the buildings mainly shopping buildings and office buildings damaged by looters in May riot in 1998. In addition, in 1999, the rupiah began to regain some of its lost value.
The improvement in the general condition boosted the production of tile. Exports shot up 300% to 272,073 tons from 66,995 tons in 1998. The surge in exports, however, was not sufficient to increase production as sales on the domestic market remained in the doldrums.
Only in 2000 demand for floor tiles rose on the domestic market boosted by the subsidy on low cost houses. In 2001, some producers was able to operate at full capacity such as PT Saranagriya Lestari Keramik.
Toward the end of 2001, demand on the domestic market suffered a setback, therefore, production in 2001 did not change much from 2000. See the following table.
BKPM said there was almost no investors indicating interest in ceramic tile industry. In 1997, there were 19 projects in ceramic tile industry including expansion projects approved by BKPM.
In 2000 and 2001, there were only 4 investors planned to invest in the industry including two PMA companies. One of the PMDN companies is PT Kokoh Inti Arebama planning to build factories in Bogor and Karawang with a total investment of Rp 108.5 billion and an annual capacity of 6.12 million tons as shown in the following table.
The decline in sales on the domestic market has prompted producers to increase exports. Exports were more profitable with the soaring value of the U.S. dollar against the rupiah.
Exports, however, were not easy. Buyers abroad demanded a price discount as they knew that the production cost in the country was much lower as a result of the rupiah fall.
In 1997 and 1998, the export prices averaged US$ 411.5 per tons but in 1999, the prices dropped to US$ 232.1 per tons. Despite the price fall, exports shot up three times larger in 1999. In 2000, the price shrank further to US$ 222.4 per ton.
China is the world's largest producer of ceramic, hut the biggest challenge for Indonesia came from Italy and Spain. Indonesian products were still competitive in quality against Chinese products, but are still a long way to go to keep abreast with products from Italy, Spain and Turkey.
Indonesian exports various types of ceramic tiles as shown in the folllowing table.
The United States Still the largest buyer
In Europe, Indonesia compete against Italy, Spain and local producers.
Indonesia has also exported ceramic tiles to various countries. The United States has become the largest buyer so far. The United States accounted for 16.8% or 52,536 tons of the country's total exports of 313,379 tons in 2000 as shown in the following table.
Imports remain substantial
Until 1997, Indonesian imported substantially large volume of ceramic floor tiles. That year imports totaled 41,957 tons valued at US$ 15.9 million. Imported ceramic floor tiles are used mainly for luxurious houses, shopping centers and office buildings and hotels.
The crisis caused the shelving of many big property projects as a result imports dropped as shown in the following table.
Other glazed tiles the largest in import
Imports have been dominated by the type of other glazed tile cube & similar articles. In 2000, imports of that type totaled 7,351 tons or 87.5% of the total imports of ceramic tiles as shown in the following table.
Import duty the lowest at 5%
Indonesia and Thailand impose the lowest import duties on ceramic goods in ASEAN. The two countries impose an import duty of only 5% as against Malaysia's 20% and Vietnam's 40%-50% on sanitary ware and ceramic tiles. The Philippines has even raised its import duty from 15% to 53% on ceramic goods.
Under AFTA the import duties on ceramic tiles have to be slashed to not more than 5%.
The high import duties imposed by some of ASEAN member countries is to protect and boost their domestic industries.
Currently Indonesia is facing tough competition from Malaysia, which succeeded in increasing its export to 50% of its total production of 78 million sq.m.
Malaysia succeeded in increasing exports as it continues to improve its design to suit the market.
Indonesia is lagging behind Malaysia in production system. Vietnam has also grown to become a potential competitor in the regional market.
However, the largest threat has come from China as that country is known to be very competitive in price. Malaysia, therefore, is considering to impose a special tariff for ceramics from China.
Distribution and marketing
Some producers handle their own marketing and some use distributors.
Direct sales are usually made with large consumers like contractors of big projects such as housing, hotel, shopping center and office building projects.
Among leading distributors in Jakarta and Jabotabek area is PT Sumber Cipta Keramike as the sole agent for PT Serinco Djaja Marmer Industries the producer of "Super Italia"
Other producers using distributor include PT Mulia Keramik Indahraya with distributor PT Catur Aditya Sentosa for Mulia Keramik.
PT Matropole named PT Satya Langgeng Sentosa as its distributor for its products Roman and Royal.
Prices tend to rise
Floor tiles have larger market size than wall tiles. After the monetary
crisis granite and marble floor tiles were used more in the real estate sector instead of ceramic tiles. Now the main consumers of ceramic tiles are individuals mainly private houses.
The prices of ceramic tiles in the country follow the rupiah fluctuation. Distributors are granted a 10%-20% discount and dealers or retailers a 15%-20% discount.
Consumers, therefore pay a higher perice of 15% of the price from factory.
The change in the general condition of the country's economy forced producers of ceramic tiles to recalculate their production costs.
The prices of ceramic tiles in the country tend to rise with the rupiah fluctuation and the recent fuel price rise.
Domestic consumption of ceramic tile is assumed to be equivalent to production plus import minus export.
Based on that assumption, consumption of ceramic tiles in 2000 totaled 152,995 sq.m. closing inon consumption in pre crisis year of 159,256 sq.m. in 1996.
In 2000, consumption of ceramic tiles rose 10% as shown in the following table.
Prospects and conclusion
Restoration of some of the lost confidence of the market in the country's political condition since 1999 has helped revive the property sector.
The impact was obvious in 2000 when demand for ceramic tiles shot up to 153 million sq.m. in the country not far below the market demand of 159.3 million sq.m. in pre crisis time or in 1996. In 1998, when the crisis was at its worst, consumption plunged to only 134.6 million sq.m.
Despite the revival of the industry, the domestic market remained in the doldrums as the crisis has not been entirely over. The buying power of the general consumers is still weak especially with the fuel price hike.
The subsidy for low cost houses helped boost demand for ceramic tiles. In short term the impact of the big flooding in the Jabotabek area will increase demand as some of the damaged houses and public buildings will need repairs.
The rupiah fall strengthens Indonesian competitiveness in international market. The production cost is cheaper in real term in the country with the rupiah depreciation. However, the fuel price hikes in January forced ceramic tile producers to recalculate their production cost.
In facing the implementation of the free trade area (AFTA) scheme in this region, Indonesian producers have to improve their quality and efficiency to be able to compete in barrier-free market.
They also have be careful in preventing labor protests that would affect the process of production and cause an increase in cost.
Other hurdles faced by Indonesian ceramic tile industry include difficulty in securing supply of frit, the basic material for glaze and coloring materials which have to be imported. Materials available in the country are inferior in quality. In addition, the country is still short of technicians in ceramic sector.
Table - 1 Imports of kaolin, 1996 - 2000 Year Volume Value (tons) (US$'000) 1996 125,343 33,353 1997 106,393 29,116 1998 134,903 37,418 1999 101,232 25,005 2000 145,253 34,987 Source: CBS/Data Consult Table - 2 Imports of kaolin by countries of origin, 2000 Country of Volume Value origin (tons) (US$'000) U S A 77,227 21,812 China 21,640 2,794 England 10,601 2,341 Brazil 9,371 2,393 Japan 6,069 1,278 Netherlands 5,588 1,029 Thailand 4,102 0,536 Australia 3,281 0,653 Others 7,374 2,151 Total 145,253 34,987 Source: CBS/Data Consult Table - 3 Producer of ceramic tiles and capacity, 2000 (million sq.m./year) Producers Location of Brand plant Muliakeramik Bekasi Mulia Ceramic Indahraya Asia Victory Industri Surabaya Asia tile/ KIA Serpih Mas Bogor KIA/ Platinum Setya Raya Tangerang Roman/Royal Keramindo Maha keramindo Tangerang Masterina Perkasa Senrico Djaja Marmer Jakarta Superitalia Union Keramik Utama Jakarta Union Keramik Diamond Gresik Diamond Indah Angsa Daya Tangerang Ikad Arwana Citra Mulia Tangerang Arwana Intikeramik Alamsari Tangerang Essenza Saranagriya Lestari K. Gresik Milan/Hercules Adybuana Persada Bekasi Cikarang Indah Cikarang Asahi Terra Cota Indonesia Cirebon Terracota Surya Siam Tanggerang - Aristika Inkernas Jakarta - Metropole Megah Tanggerang - Impero Granito Utama Jakarta Porsmo Duta Megah Matra Jakarta - Keramik Sumberaya Malang - Kendimasindo Komindo Centuriraya Jakarta - Wahyunusa Wahana Bekasi - Cahayaputra Asa Jakarta - Keramik Industri Keramik KJ. Jakarta - Others Total Producers Wall Floor Total Muliakeramik 17.0 29.0 46.0 Indahraya Asia Victory Industri 10.0 15.0 25.0 KIA Serpih Mas 7.5 16.5 24.0 Setya Raya 6.0 16.0 22.0 Keramindo Maha keramindo - 17.0 17.0 Perkasa Senrico Djaja Marmer 2.7 7.5 10.2 Union Keramik Utama 9.0 1.0 10.0 Keramik Diamond 2.0 7.0 9.0 Indah Angsa Daya 2.5 5.5 8.0 Arwana Citra Mulia - 7.2 7.2 Intikeramik Alamsari - 7.0 7.0 Saranagriya Lestari K. - 4.5 4.5 Adybuana Persada - 2.0 2.0 Cikarang Indah - 2.8 2.8 Terra Cota Indonesia - 1.0 1.0 Surya Siam - 4.2 4.2 Aristika Inkernas - 4.0 4.0 Metropole Megah 3.0 - 3.0 Impero Granito Utama - 3.6 3.6 Duta Megah Matra Keramik Sumberaya - 2.1 2.1 Kendimasindo Komindo Centuriraya - 2.1 2.1 Wahyunusa Wahana - 2.0 2.0 Cahayaputra Asa - 2.0 2.0 Keramik Industri Keramik KJ. - 1.8 1.8 Others 3.0 6.5 9.5 Total 62.7 167.3 230.0 Source: Department of Industrt and Trade/Data Consult Table - 4 Production of ceramic tiles, 1996 - 2000 Year Production Growth ('000 [m.sup.2]) (%) 1996 159,233 - 1997 139,290 -12.2 1998 134,700 -3.2 1999 139,400 3.5 2000 153,300 10.0 Average growth -0.5 Source: Department of Industry and Trade/Data Consult Table - 5 Projects in ceramic tile industry approved by BKPM in 2000 and 2001 Company Location Status Capacity (M2/year) PT Sinar Karya Gresik, PMDN 3,600,000 Duta Abadi East Java PT Jui Shin Medan, PMA 7,000,000 Indonesia North Sumatra PT Kokoh Inti Bogor & Karawang, PMDN 6,120,000 Arebama West Java PT Fu Chen Kera- Serang, Banten PMA 2,600,000 mik Indonesia Company Investment Commence ment of (Rp'mill.) operation PT Sinar Karya 75,000 May 2002 Duta Abadi PT Jui Shin US$ 5.1 mill. Jun'2004 Indonesia PT Kokoh Inti 108.500 *) Aug'2004 Arebama PT Fu Chen Kera- US$ 6 juta *) Nov'2004 mik Indonesia *) Including investment for other ceramic products Source: Investment Coordinating Board/Data Consult Table - 6 Exports of ceramic tiles, 1996 - 2000 Year Volume Value (tons) (US$'000) 1996 30,830 13,320 1997 28,452 11,712 1998 66,995 19,395 1999 272,073 63,152 2000 313,379 69,686 Source: CBS/Data Consult Table - 7 Exports of ceramic tile by types, 2000 Type of ceramic Volume Value (tons) (US$'000) -Other glazed tile, cube & 293 3.703 similar articles, in asquare the side of which lte. -Other unglazed tiles, cube & 17.501 3.191 similar articles, whether or not rectangular -Glazed tile, cube & similar 114.715 23.817 articles, in asquare the side of which lte. Total 41.957 15.860 Source: CBS/Data Consult Table - 8 Exports of ceramic tiles by countries of destination, 2000 Country of Volume Value destination (tons) (US$'000) USA 52,536 12,068 Filipina 52,050 8,938 Australia 34,258 9,059 South Korea 24,509 5,008 Italy 24,239 5,528 Singapore 19,690 5,312 South Africa 17,623 2,644 Canada 6,392 1,297 Others 82,082 19,832 Total 313,379 69,686 Source: CBS/Data Consult Table - 9 Imports of ceramic tiles, 1996 - 2000 Year Volume Value (tons) (US$'000) 1996 54,092 20,942 1997 41,957 15,860 1998 13,028 12,046 1999 2,474 472 2000 8,405 2,343 Source: CBS/Data Consult Table - 10 Imports of ceramic tiles by types, 2000 Type of ceramic Volume Value (tons) (US$'000) -Other glazed tile, cube & 7,351 1,904 similar articles -Other unglazed tiles, 81 90 cubes & similar articles -Unglazed tile, cube & 530 238 similar articles -Glazed tile cube & similar 443 112 articles Total 8,405 2,343 Source: CBS/Data Consult Table - 11 Prices of ceramic tiles set by several producers, Jan. 2002 Producers Brand Type Measurement (cm) Saranagriya Milan White 20x25 Lestari Keramik White 20x25 Dark 20x25 White 30x30 Dark 30x30 VIP Series 30x30 (White) Rustic model 30x30 Rustic model 33x33 White 40x40 White 40x40 Dark 40x40 Super white Super dark White 30x30 Hercules Mad model 30x30 Glass model 30x30 Double campana 30x30 White 40x40 Double campana 40x40 Asia Victory Asia Tile Albatros 40x40 Industry Onyx 40x40 Phyrus 40x40 Taup light 20x20 Mexico 20x20 Spain 20x20 Exel white 20x20 Producers Brand Type Price (Rp/[m.sup.2]) Saranagriya Milan White 36,750 Lestari Keramik White 45,650 Dark 52,550 White 39,200 Dark 46,550 VIP Series 43,000 (White) Rustic model 40,600 Rustic model 42,150 White 39,300 White 41,300 Dark 48,150 Super white 45,500 Super dark 48,150 White 33,000 Hercules Mad model 36,050 Glass model 46,250 Double campana 39,200 White 35.350 Double campana 41.350 Asia Victory Asia Tile Albatros 35.200 Industry Onyx 35.200 Phyrus 35.200 Taup light 35.350 Mexico 32.300 Spain 32.300 Exel white 34.150 Source: Data Consult Table - 12 Estimate of ceramic tile consumption, 1996 - 2000 Year Consumption Growth ('000 [m.sup.2]) (%) 1996 159,256 - 1997 139,304 -12.5 1998 134,645 -3.3 1999 139,130 3.3 2000 152,995 10.0 Average growth 0.6 Source: Data Consult
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|Comment:||Ceramic tile industry reviving. (Industry Profile).|
|Publication:||Indonesian Commercial Newsletter|
|Article Type:||Industry Overview|
|Date:||Feb 13, 2002|
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