2008-2009 DATA CONSULT. All rights reserved.
MARKET INTELLIGENCE REPORT ON

DEVELOPMENT OF CABLE MANUFACTURING INDUSTRY IN INDONESIA

March 2009

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Introduction

The country's cable industry was badly hit by the 1998 crisis.  Until 2004, utilization of the   production capacity of the industry was only around 25%- 30% of installed production capacity.  The industry began to revive only in the past three years starting 2006.   In 2007, the country's cable production totaled 300,000 tons or 65% of the installed capacity   of 445,000 tons. Brisk developments in the power sector   and growing exports have also boosted the industry lately.

The fast growing demand for electricity has forced the government to launch am ambitious plan called crash program to build coal fired power plants with a total capacity of 10,000 megawatts to be completed in 2010-2011.  The program is to be followed with a second phase with the same capacity. The first program is in progress pushing up demand for electric cable.

Demand for cables has increased not only n the domestic market but also in export market such as Middle East.  The oil rich region, which earned windfall profit with the soaring price of oil since 2006, is safe from the impact of the global financial crisis.  Property and infrastructure development continue to be brisk in Middle East. The projects need large supply of electric cables including transmission and distribution cables.

The revival of the cable market in 2007 and 2008 was reflected by the financial performance of listed cable producers. PT Sumi Kabel reported sales at only Rp.976 billion in 2004. In 2006 it sales shot up to Rp1,914 billion . Similarly, sales of PT Supreme Cable (SUCACO)  surged  to Rp2,281 billion  in 2007 from Rp1,483 billion  in 2006.

A setback, however, came toward the end of 2008 when sales began to sink  including in export market. As a result of the global financial crisis. 

Increase in the prices of basic materials like copper  contributed to the problem faced by cable industry  lately.  Many cable producers suffered losses on foreign exchange  as they bought  the basic materials in US dollar  the value of which surged  facing the rupiah.

Despite the gloomy outlook lately, the prospects for cable industry are still encouraging  in the country with the big plan of the government in the electricity sector. 

Types of cable

Cable industry in Indonesia has expanded and could produce various types of cable electric cable, telecommunication cable, control cable, fiber optic, etc.

Electric cables consist of different types by voltage High Voltage (HV), Medium Voltage (MV), and Low voltage.  Electric cables could also be divided into  Bare Aluminum Conductor  and  Bare Copper Conductor. Generally bare  cables  are aerial cables  having  extra high, high  and medium voltage .

Almost all large cable producers  such as PT Sucaco, Sumi Indo Kabel, Voksel elektrik,  produce all types of cables both electric cable, telephone cables,  and  fiber optic. 

Each cable has an identity showing the type of conductor, type of isolator, types of insulator, etc.  Cable with NYY code is cable with  copper conductor (using the code of N), PVC isolator,  in two layers ( YY code)

Cable  could have several types of conductors  and isolators  and with toughening material or protector  from  steel tape. For example, high voltage  underground cables  are apart from a number of layers of isolator,  are  also given steel tape protectors  to protect them from being damaged  from possible impact  of hard   or sharp material .  See the following table.

The cable products of Sucaco include low voltage, medium voltage  and  high voltage. Apart from electric and telephone cables, Sucaco produces enameled wires, which include Polyvinyl Formal Copper Wire, Polyester-imide Copper Wire,  Polyester Copper Wire,  Polyurethane Copper Wire, Polyester Nylon Copper Wire, and Polyester Amide Imide Copper.

Standardization of cable

The government  has determined 11 national standards for cable such as SNI determined by the industry ministry including SNI 04-2697-1992  and  SNI 04-3234-1992.  SNI 04-2697-1992 is used for  electric cables using   XPLE as isolator  and electric cable having voltage raging from  1 kV  to 30 kV.  SNI 04-3234-1992  is used for flexible cable isolated and sheathed with PVC having nominal voltage of  500 V (low voltage)  that is  the type of   NYMHY

The SNI  was  determined  in 1988  through a decision of the industry and trade minister No. 407/M/SK/10/1980 on the application of Indonesian industrial standard  (SII)  and the use of SII for  six types of low voltage standard electric cable  and in 1988  had through a decision of the Minister  No. 74/M/SK/2/1988 required the use of   SII  and the SII mark  for 5  types of  flexible electric cable  : SII.2256-87; SII.2257-87; SII.2258-87; SII. 2259-87  and  SII. 2260 -87.

Starting  1992 , SII  was changed with Indonesia  National Standard (SNI) base don a decision of the Industry and Trade  Minister.

Cable producers and  production capacity

After the 1998 crisis , there was  almost no addition in the number of cable factories and installed capacity. The member of the association of cable producers (APKABEL), which groups almost all cable factories  in the country did not change much . In 1997 , there were 35  members of the association  and  2006, the number   slightly  declined to 34 companies.

Base don official data at the industry ministry , among 48 registered cable factories  in 2005 , only 33 were in operation.

Number of cable factories  grouped in Apkabel

"        1974 =   5 companies
"        1997 = 35 companies
"        2000 = 35 companies
"        2002 = 36 companies
"        2005 = 33 companies
"        2006 = 34 companies
The  production capacity of the country's cable industry   has not changed much since 2004.  Base din data at APKABEL the production capacity  is around 445,000 tons  a year for all  types of cable .

Most cable factories  date back to year before the 1998 crisis.  Low demand caused factories to operate much below  their production capacity. Increase began only in 2005 to peak in 2007 . New investment began in  cable industry  that year including for capacity expansion. A Malaysian company, PT Wonderful Wire and Cable ,  built a factory in Medan . Another foreign company PT Prysman invested for capacity expansion.

Currently there are  15 major cable makers  in Indonesia . Most of them are old companies like PT Tranka  Kabel  that came on line in 1952.  PT Sumi Indo Kabel Tbk (Perusahaan)  was established  on  23 July 1981, with the name of PT Industri Kawat Indonesia. The name of the company was changed  with PT IKI Indah Kabel Indonesia in   1982.

PT Voksel Electric Tbk  was established in  1971 . Later its status was changed  into a foreign investment (PMA) company  after establishing cooperation with Showa Electric Wire & Cable Co. Ltd  from Japan.  There are six publicly listed cable makers -- PT Supreme Cable Manufacturing and Commerce TBK (SUCACO), PT Sumi Indo Kabel, PT Kabelindo, PT Voksel Electric,  PT KMI Wires and Cables  and  PT Jembo Cable.

Cable producers operate at high capacity

The country's cable industry  was hit hard by  the monetary crisis in 1997/1998  on falling demand . Capacity utilization was only 25%-30% . The condition improved only in 2004 and 2005 , when the country's economy began to recover from the crisis.  The growth of the industry peaked in 2007 when the government launched  its 10,000 megawatt crash program in the electricity sector pushing up demand for electric cables.  Demand also rose in export market  notable in Middle East where  the construction sector  was brisk  amid the soaring oil prices.  Strong demand in 2007  resulted in an increase in capacity utilization of the country's cable industry to 65%-70%.

The capacity utilization  was expected to scale up  further in 2008  to around 90%  of the  total installed capacity   of  445,090 ton, if the crash program in the electric sector ran as expected. 

A faster growth was recorded in the production of electric cable  to follow the brisk development in the electric sector. Meanwhile, almost all telephone operators including state telecommunication company PT Telkom Tbk use fiber optic cable in their new projects. All producers of metallic cable could produce fiber optic cable. The government has a big  telecommunication project, Palapa Ring,  using fiber optic cable.

Toward the end of 2008,  demand for cables began to decline as a result of the global economic slowdown and crisis.  Many large property  projects  including  development of new cities in Middle East have been shelved.

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