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INDONESIAN COMMERCIAL NEWSLETTER
June 2010

HEAVY EQUIPMENT INDUSTRY IN INDONESIA



Current issues

Heavy equipment industry recovered strongly in 2010 from deep slump in 2009 when global financial crisis hit almost all sectors including the property and construction sectors, which are among the major users of heavy equipment.

Heavy equipment industry was badly hurt by the global financial crisis resulting in a sharp fall in the country's production of heavy equipment to 1,814 units in 2009 from 5,914 units in 2008. Main producers of heavy equipment in Indonesia including Komatsu, Caterpillar and Hitachi suffered a setback.

The slump in 2009 came after rapid growth  of heavy equipment industry  in 2008 boosted by strong demand for heavy equipment from  various sector notably   coal mining  industry and oil palm plantations . Demands were also strong from the construction and property sectors.  That year delivery had to be delayed for up to six months as demands far exceeded production capacity.

The impact of the global financial crisis, which struck late 2008 were, felt strongly early 2009. Until end of 2008, sales of heavy equipment were normal to meet orders already made earlier.  Early 2009, however, many orders were shelved as the projects mainly construction and property projects that needed the equipment were also shelved. The main problem was difficulty in securing funds from lenders which tended to be more cautious and selective.

The condition, however, changed for the better in entering 2010. Demand for heavy equipment surged again especially as the country managed to go through the difficult period relatively unscathed.  Indonesia was among the few countries recording a positive growth in 2009 as unlike many other countries the country's economy is oriented more too domestic market with growth sustained and driven mainly by the consumption sector. In addition, demand for coal rose again especially from China and India, which recorded high economic growth amid the global malaise.  The price of crude palm oil also raised prompting expansion of oil palm plantations that need heavy equipment. 

Heavy equipment industrialists see with optimism the turn of condition in 2010. In the first half of 2010, the country's production of heavy equipment reached 2,495 units exceeding the production of 1,814 units in the whole of 2009.
Type of Products

The type of heavy equipment produced in Indonesia is dominated by small size ones. For example, the main type of excavator, produced by Komatsu is PC 200 model weighing 20 tons. The type of bulldozers is mainly ones weighing 20 tons although the factory could produce 45-tons excavators and 28-tons bulldozers.

There are various types of heavy equipment  produced  in Indonesia.  Komatsu has the largest types of product  including excavators, bulldozers, motor graders  and dump trucks. Natra Raya, the brand holder of Caterpillar, produces  excavators, bulldozers and  motor graders . Caterpillar product of excavator  with the  type of  320 C  is the competitor of Komatsu  product  of  20-tons  PC-200  in the market.

Determined to maintain lead in the market which is bristling with aggressive competitors, United Tractor (UT) launched a new product of excavator, its latest series of PC 200-8, PC 400-8 and PC 130-8 in March 2010.

PC 200-8 is offered wit a price of US$ 111,000 or around Rp 1 billion. The company also launched the excavator series of PC 130F-7 and PC 400-8. The three types have been equipped with KOMTRAX (Komatsu Machine Tracking System), which has   website, that it could be monitored any time and any place.

With its product of latest technology, UT is more confident in meeting its competitor's especially heavy equipment products from China. 

The following table shows types of heavy equipment produced by companies grouped in HINABI (the Association of Heavy Equipment Industry Indonesia).


The products of heavy equipment produced in the country industry had a local content of 30%-50% in 2009. In 2010, the local content is to be increased to 50%-60%.

Last year, excavators had a local content of 50%, dump trucks 30%, bulldozer 45%, motor graders 40%, and forklift 40%.

The basic materials for heavy equipment imported by the country include center brackets, monitor panels, engines and hydraulic parts. Heavy equipment components such as cutting plates, tires, batteries, and under carriage parts have been produced domestically.

Komatsu Indonesia built the second foundry, which produces cast iron spare part with a capacity of 1,800 tons a month to increase local content of its heavy equipment products.

Producers of Heavy Equipment in Indonesia

Indonesia has three producers of heavy equipment with products including excavators, bulldozers, motor graders and dump trucks. The three companies are PT Komatsu Indonesia producing heavy equipment with the brand of Komatsu, PT Caterpillar Indonesia (previously PT Natra Raya) with the brand of Caterpillar, PT Hitachi Construction Machinery with the brand of Hitachi. There is another producer PT United Tractors Pandu Engineering which produces forklifts with the brand of Patria.


PT Komatsu Indonesia

PT Komatsu Indonesia was established in 1982 in Cakung, North Jakarta.  The production facility of the company, which is integrated in a single site, covers an area of approximately 18.2 hectares, including 15,876 sq.m. For assembly plant, 15,390 sq.m. For fabrication plant, 11,800 sq.m. For foundry plant 1, 10,000 sq.m. For foundry plant 2 and 3 stories of office building.

The company started business assembling heavy equipment such as bulldozers, wheel loaders, motor graders and hydraulic excavators imported in the form of completely-knocked-down components from Komatsu Ltd. in Japan. Some of the components, however, have been manufactured in Indonesia.

In 1987, in compliance with the government's call for the use of more local content, the company built own facilities to manufacture components. In 1998, the company even began to export part of its components to Japan for Komatsu Ltd.

In 1991, the company built a foundry plant. Komatsu Indonesia now manufactures components to be supplied to all Komatsu production units around the world. In 1992, it built a frame fabrication plant aimed at increasing its production of components.
The company has exported components since 1988 and 1995 marked the first export of a complete unit of heavy equipment from Komatsu Indonesia. In only a little longer than a decade, the company had transformed itself from an assembler of heavy equipment to an export-oriented manufacturer of heavy equipment.

In November, 2005, Komatsu Indonesia built its second foundry plant, Foundry Plant 2, to produce cast iron components from carbon and low alloyed steel with an installed capacity of 900 tons a month.

In 1995, PT Komatsu Indonesia became a public company but on January 2 in 2006 it was de-listed. Komatsu Ltd., the principal of PT Komatsu Indonesia acquired 13% stake in the company from PT United Tractors Indonesia reducing UT's stake to 5% in that company.

Komatsu's production capacity is 3,600 units a year of heavy equipment including 240 units of dump trucks.

PT Caterpillar Indonesia (PT Natra Raya)
Caterpillar heavy equipment products in Indonesia are assembled by PT Caterpillar Indonesia, previously PT Natra Raya, in Cileungsi, Bogor, West Java. PT Caterpillar Indonesia is 80% owned by Caterpillar from the United States and the rest is owned by PT Marga Tiara Trakindo. The sole agent of Caterpillar in   Indonesia is PT Trakindo Nusantara

PT Hitachi Construction Machinery Indonesia
PT Hitachi Construction Machinery Indonesia (HCMI) in Cibitung, Bekasi, is a joint venture between Hitachi Construction Machinery Co. Ltd of Japan, Itochu Corporation also of Japan, PT Murinda Iron Steel, PT Anggaputra Dhananjaya and Hitachi Construction Machinery Singapore, Pte. Ltd.of Singapore. It was    established in May, 1991 and started operation in October in the same year.

HCMI produces excavators, the types of heavy equipment with the largest market in the country. Since 2000, demand for excavators has increased prompting PT HCMI to increase its production capacity from 700 units to 1,000 units a year. The company invested US$ 10 million to expand its capacity.

In 2005, Hitachi increased its production capacity to become 1,000 units/year and to 1,200 units/year in 2007
HCM has two production facilities in Bekasi, one in Cibitung producing excavators and another factory in Rawa Pasung for engineering, heavy equipment fabrication & machining.

Production Capacity:
"        Hydraulics Excavators: 1,200 units/year
"        Engineering Products: 10,000 tons/year
"        Components: 7,000 tons/year

Production by types of product

The global financial crisis in 2009 rendered a big blow to the country's heavy equipment industry. Based on data form HINAB, in 2009, the country's production of heavy equipment reached only 1,814 units, shrinking 69% from 5,914 units in 2008.

The main buyers of heavy equipment are the mining sector accounting for 70%, the plantation and forestry sector for 10%, and the construction sector for 20% of the total sales.

The condition, however, improved in 2010. The country's heavy equipment industry recovered fast as Indonesia's economy was able to ward off the impact of the crisis and managed to chalk up a growth of 4.5% in 2009. In 2010, the growth is expected to rise to at least 6%.

Sharp fall in sales in 2009   was recorded mainly in the construction and property sector. Many construction and property projects were shelved that year.

Decline in sales in the mining and plantation sectors was mainly caused by difficulties in securing loan funds from banks, which became more cautious selective in extending loans.  Lenders are more cautious after the traumatic experience huge non performing loans following the 1997/1998 monetary crisis. In fact the global financial crisis had no significant effect on the mining sector especially coal mining industry as market demand for coal remained strong.

In 2010, Hinabi predicted that the country's production of heavy equipment will rise to 4,000 - 5,000 units. In the first half of the year the country's production of heavy equipment already reached 2,495 units.

The production target is still below the peak production of 5,914 units in 2008.

The shrinking production in 2009, when the installed capacity was   6,500 units a year, resulted in a sharp fall in capacity utilization to 34%   from 90% in 2008. In 2010, the capacity utilization is expected to average 70%.

Among the types of heavy equipment already assembled in the country are excavators, bulldozers, motor graders, dump trucks, and forklifts. Excavators dominate the country's production of heavy equipment. In the first half of 2010, production of excavators totaled 1,324 units or 53% of the country's total production of heavy equipment. Bulldozer production made up 23% of the country's total production of 2,495 units of heavy equipment.

The largest producer of heavy equipment  in the country is Komatsu. In 2007 Komatsu's total production of  heavy equipment  was 2,400 units including 1,530 units of excavators. See the following table.

New Investment

In 2007-2008, the installed capacity of the country's heavy equipment industry was expanded by 3,500 units with an new investment of US$ 180 million including US$50 million for investment in heavy equipment component industry.

Heavy equipment  producer, PT Komatsu Indonesia plans to increase investment  by US$ 100 million  in  three years  starting 2008 to expand its production capacity.  Part of the fund will also be used to finance   research  and technology development  through 10 subsidiaries  including  PT Komatsu Undercarriage Indonesia (KUI), PT Komatsu Forging Indonesia (KOFI), and  PT Pandu Dayatama Patria (PDP), and  PT Komatsu Reman Indonesia.

In  2005  and  2006,  Komatsu Ltd increased investment by  Rp235  billion  or US$24.6 million  and in 2007 PT Komatsu Indonesia  invested again Rp111 billion  or US$12.2 million . With the additional investment  the production capacity    of  Komatsu Indonesia  rose to   3,600 units per year  dominated by hydraulic excavators and  bulldozers.

Capacity expansion is planned by Hitachi. Hitachi Construction Machinery Indonesia (HCMI) plans to expand its production capacity to 4,000 units in 2013 from 3,000 units at present. ....


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