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INDONESIAN COMMERCIAL NEWSLETTER
June 2012

DEVELOPMENT OF SPINNING INDUSTRY IN INDONESIA



Current Issue

The country's spinning industry has continued to grow in the past two years with production increasing to 2,284,000 tons in 2011 from 1,872,000 tons in 2010. The capacity utilization of the industry also grew to 74.9%  in 2011  from 73.6% in the previous year. 

Exports of the country's spinning products  rose slightly  to 138,000 tons  valued at US$ 404 million in 2011 from 119,000 tons valued at US$ 399 million in  2010. The slow growth in exports  was caused by weak demand for textiles and   textile products amid the global crisis.

Meanwhile, the domestic market has been flooded by imported textile products from China. According to the Committee for the Indonesian Trade Security (KPPI) of the Trade Ministry,  domination of the domestic market by a number of Chinese products has been investigated. For example, domination of Chinese products of cotton yarn, other than weaving yarns in HS 5205 and HS 5206, have been investigated  and  an  announced is expected by  the finance minister about the tariff. The KPPI said by early 2012 Chinese products already had a 21.55% of yarn market in the country.

In general, textile industry and  textile products of Indonesia are quite competitive  even in international market as Indonesia producers operate integrated industry  from the upstream to downstream industries - spinning, weaving and knitting industries and garment industry. Indonesia's spinning industry is among the largest in Asia and Oceania. Indonesia's weaving industry  and garment industry are  also among the largest  in the world after those of China.


Description of  Products

Textile yarns are composed of staple fibers or filament both natural and synthetic  blended for  textile production.
Based on the composition of fibers, there are several types of textile yarn : cotton yarns, viscose yarns, jute yarns, woolen yarns, silk yarns, line yarns, nylon yarns, polyester yarns  and acrylic yarns.

Viscose yarns are made of  synthetic fibers regenerated so that the structure is the same as other cellulose fibers.
Viscose yarns  are shining  and whiter in color than cotton yarns.
By forms there are two types of  viscose:
a.    Viscose filament yarn,  made from a group of (15-120) viscose fibers excepting for cloth having certain effects  such as on voile and  crepe.
b.    Viscose staple yarn  which is made from cuts of viscose filament with certain length according to the length of cotton fiber or woolen fiber to be spun . 

Generally, viscose yarns are used as follows:
a.    Viscose yarns  from viscose fiber kupromunium is used specially as soft clothe material  with good quality, ladies' socks  and underwear (lingerie), undershirts (knitting) and  batik  (weaving) .
b.    Viscose yarns  from  viscose fiber are used as clothe material, knitting yarns  and for layer material.  

The government has issued Indonesian  National Standard (SNI) for the quality of yarns as follows:


Characteristics of Product

Spinning industry is an intermediate industry of textile industry. Spinning industry processes basic materials such as cotton, viscose fiber, acrylic and polyester staple fiber  into yarns.

Spinning industry produces out put in the form of different types of yarn depending on the basic materials. Output in the form of yarns is used  in weaving industry to be woven into fabric and/ or in knitting industry to be processed into knitted fabric.

There are several processing machines in spinning industry including blowing, carding, pre drawing, lap former, combing, drawing, speed, ring spinning, winding machines.
a.   Blowing and  Carding
Blowing and carding is a process of to produce yarns  in which the basic material - cotton  or polyester - is put into the blowing machine to disentangle the fiber clumps, remove the dirt  and shaken  that the mixture of several types of cotton. The outcome of the process is lap to be reprocessed in the carding machine  to turn out sliver.
b.   Combing, Drawing and  Finishing
This process is a follow up of the blowing and  carding processes to straighten the fibers and make them parallel , improve the evenness of the fiber  and turn out sliver .
c.   Ring Spinning and  Finishing
This process is to prepare  yarn  from the result of spinning  in the form of Cones with Mach Conner machine.


Production Capacity  and  Producers

a. Production capacity up 4.5% per year

The production capacity of the country's  spinning industry  continued to increase in the period of 2007-2011  with growth averaging 4.5% per year.  During the period,  the production capacity of the country's  spinning industry increased after expansion by some producers.

In 2008, the production capacity  grew 6.3%   to 2,716,000 tons per year and to 3,046,000 tons in  2011.

b. Number of  machines growing

The number of textile factory machines has increased with the process of restructuring.

Based on official data at the industry ministry, the number of spinning machines  in the country totaled 9,911,691 units with 110,000 units of rotor in 2007. The number of spindles rose to 10,769,691 units and  the  rotors to  109.864 units  in  2008. The numbers of spindles rose further to 11,540,727 units in 2011. The increase resulted in an increase in the production of textiles to meet domestic and export demands.   

The number of spindles  used by Indonesian spinning industry, however, is much smaller compared to China's around 100 million units, India's around 45 million  units and Pakistan's  30 million  spindles.

c.  Utilization 74.9%

In the period of 2007-2011  the capacity utilization of spinning industry  declined 2.6% per year.

The  capacity utilization of the country's spinning industry has declined since 2008 when the factories operated only at 80.9% of their total installed capacity  from 83.3%  in 2007. The capacity utilization shrank further to 74.9%  in  2011. 

The decline followed  weak market demand amid  the global crisis. PT Sritex , a yarn producer  in Bandung cut its selling price  by 50% in the US market in a bid to increase sales and maintain capacity utilization.

c. Producers and production capacity

Based on data  from the Industry Ministry the country has 204 companies operating in spinning industry , but most of them are small producers of spun yarns.

Demand for yarns dropped in the United States, the  country's largest market . As a result , a number of textile and  textile product (TPT) companies were forced to slowdown  or stop operation resulting in many jobs cut. One of the companies  was  PT Malaktex.
Among the country's largest producers are PT. Indorama Synthetics, Tbk, PT. Apac Inti Corpora Tbk, PT. Tifico, PT. Unitex Tbk.  and PT. Primissima.   


Profile of Main Players

Indorama

PT Indo-Rama Synthetics is a foreign investment (PMA) company  established in 1975  by  S.P. Lohia and  operates in  yarn spinning industry.  The company is the largest  producer of  polyester in Indonesia. In 1990,  Indorama was listed  selling  42% of its shares  to the  public.

The products of Indorama consist of Textured Yarn of Polyester of Synthetic Filament-Man-Made Filaments, yarn of polyester of syhthetic filament-man made filament, high tenacity yarn of polyester of synthetic filament - man made filament, woven fabrics of synthetic staple fibres - man made staple fibres.

In its first year of operation Indorama has a factory built over a 67 hectare plot of land in Purwakarta. Indorama  has a production capacity of 270,000 tons of Spun Blended Yarn  per year and 30 million  meters of 100% Polyester Filament Grey Fabrics  per year.

Later Indorama built a new factory over a 50 hectare plot of land in Cempaka some 15 km  from  Purwakarta. The new factory is equipped with 2 units of yarn spinning factory,  one specially to produce Sewing Thread Yarn (100% polyester) and  another to produce 100% Combed Contton Spun Yarns with a production capacity of  9,000 tons. Another factory in Bandung has a production capacity of 22 million  meters of  dyed and printed  100%-Polyester Filament Fabrics.

The facility of machines in the factories of Indorama use cutting-edge technology  provided in cooperation with the world principals Du Point (USA), Zimmer, Trutzschler & Schlafhorst (Jerman), Toyobo, Teijin Seiki, Toyoda and Murata (Japan). To support its operation Indorama has built a power plant with a capacity of  60 MW operating since 2006.

Indorama received a certificate of ISO 9001:2000 for Quality Management System and the certificate of OEKOTEX for yarn and fibre products. It has exported its production to various countries including Australia, European Union  and  USA.
Currently, its polyester production contributes 73% to its total sales  with spinning production accounting for 21%. Indorama is the world's largest exporter of Filament Yarns, Staple Fibre & PET Resin to 93 countries of destination.  

Indorama has set aside US$ 70 million for capital spending in 2012 and  2013. In  2012 it plans to spend US$ 35 million of the fund to build 2 factories in Purwakarta, West Java and  in  Uzbekistan.

The two factories will increase  the production capacity  by 20,000 tons per year  to  68,000 tons  in 2013 , up from 48,000 tons per year  at present.


Apac Inti Corpora

PT Apac Inti Corpora is a  producer of  yarn and  textiles. It has yarn spinning  factory and fabric weaving plant. Apac operates the world's largest  textile factory complex  in a single location over a 247 hectare plot of land in Semarang, Central Java. Apac operates 14 units of factory with 14,000 workers. It is an integrated industry  with modern spinning and weaving machines

Currently,  PT AIC has a  production capacity of 480,000 bales (1Bale = 181.44 kg) of yarn per year,  80,000,000 meters of grey fabric and 60,000,000 yards of denim fabric per year.

Apac uses the brand of  "APACINTI"  for its products. Apac has exported part of its production to around 70 countries. Around 70% of its production is exported to North and South America, Europe, Asia, Africa and  Australia and  the remaining  30% for domestic market. Its exports are valued at US$ 238 million  per year on the average.

In early  2008, Apac Inti Corpora cooperated with PT Dayaindo Resources International Tbk to build a coal-fired power plant (PLTU). Earlier Apac it relied on  generator sets . The PLTU came on line in 2011  with a capacity  of 45 MW  built at a cost of  US$ 45 million.
PT AIC has received the certificates of KEMA: ISO 9001:2000 (Quality and Customers Satisfaction) and  ISO 14001 (Environment Management System).


Panasia Group

The group has two companies  PT. Sinar Pantja Djaja (SPD) and  PT. Fiberindo Inti Prima (FIP)  operating in spinning industry . SPD in Semarang, Central Java, has a factory with   120,000 spindles,  and FIP has one  with 60,000 spindles, both located in Tangerang, Banten. 

SPD is one of the country's largest exporter of yarns with products including 100% RS viscose Ne 30's, 100% RS polyester Ne 30's, Polyester viscose Ne 30's,  Ne 30/2 and  Polyester contton Ne 30's. SPD and FIP are export oriented with export destinations the United States, Brazil, Germany, Mexico, Egypt  and South Korea.

Unitex

Unitex  was established in 1971 as a PMA  with Marubeni of Japan as a 25.23% shareholder. The company is located in Bogor, West Java, operating an integrated textile industry  with spinning and weaving factories . In the beginning Unitex operated only a weaving factory before building a spinning plant with 36 sets of machines in 1972.

In 1982, Unitex launched  initial public offering floating 43.2% of its shares on the Jakarta Stock Exchange. In 1990, the company expanded its spinning factory bringing the number of its spinning machines to 17 units.
Currently,  Unitex has a  production capacity for 17,400 bales of spun yarns  and  21.6 million meters of weaving yarns and dyeing capacity of 24 million meters per year.
In  2012, Unitex suffered a setback  in performance on weak demand in export market.  In 2011, Unitex produced around 1 million  meters of cloth per month . In 2012,  production  dropped to only 700,000 - 800,000 meters of textile per month. The decline  was a result of global slump  with the protracted European debt crisis.

There are two state companies operating in the textile sector -- PT. Industri Sandang Nusantara and PT. Primissima which have spinning and textile factories.

PT. Industri Sandang Nusantara (PT ISN) was established in 1965. Currently it has nine yarn spinning factories  with 318,000 spindles. Its factories are located in West Java,  Central Java,  East Java,  Bali and South Sulawesi.  

Three of its factories are located in Cilacap, Secang and Tohpati, operated directly by PT. ISN,   and the rest are  rented out to other companies.

The three factories operated by ISN have a total capacity of 150,000 spindles, and the six other units  have a total installed capacity of 168,000 spindles.   
PT. Primissima was established in 1971 as a joint venture between the government   and the Association of Indonesian Batik Cooperatives (GKBI). The government's share is in the form of one spinning unit  and a weaving unit  and equipment as a grant from the Dutch government. The grant was aimed at preserving the production of high quality unbleached plain cloth known as mori. GKBI contributed land, factory building, installation cost and operation capital. Primissima has an installed spinning capacity  of 2,580 tons per year. The factory is located in Yogyakarta producing yarns and grey 100% contton of high quality. The company received the certificate of ISO 9001 : 2000 for good quality.

PT Primissima was established as a joint venture with the state holding the majority stake of 52.79 percent with GKBI Investment  holding the remaining  47.21 percent.

PT Primissima operates spinning and weaving factories processing cotton fiber into yarn to feed its weaving factory to produce grey fabric. Primissima  cooperates with a third company in the finishing  process of the grey fabric.

Currently  Primissima has  63 sets of  spinning machines of Rieter equivalent  to 36,288 spindles, 422 sets of weaving machines and 104 sets of air jet loom (AJL) machines.

PT. Primissima has shown poor  performance  under poor management reporting losses form year to year. The government, therefore, plans to privatize it.


Production Grows Only 1.8% Per Year

In the period of  2007 - 2011, the country's spinning production has increased only 1.8% per year on the average , After shrinking 3.5%  to 2,123,000 tons in  2009, the  production rose 3.9% to 2,207,000 tons in 2010 and 3.5% to 2,284,000 tons  in  2011. 


New Investment

There are big potential of relocations of factories from China, South Korea and  Taiwan, but the country is not ready to receive relocation to the country  especially on poor infrastructure notably in power supply. The opportunity, therefore,  was grabbed  by  Vietnam and  Bangladesh.
In the past  three years some producers plan capacity expansion.

PT. Industri Sandang Nusantara (PT. ISN) planned to increase its capacity by  110,000 bales per year with an  investment of around Rp 300 billion.  Its factories  in Central Java and  East Java  will be equipped with new machines to be operational in 2013.

The capacity of factory in Central Java will be raised by 48,000 bales per year,  and the one in East Java by 70,000 bales per year.  The addition in capacity  will increase the total production capacity   to 200,000 bales per year.

Meanwhile, PT. ISN has moved its factory in  Karawang,  West Java and Grati, East Java to Central Java for efficiency.

Expansion and relocation are part of its mid  term program until 2015 to cost US$40 million. The fund is to be used to buy 168,000 new spindles to replace old ones.
PT Indorama Synthetics Tbk and  PT Asia Pacific Fibers Tbk will increase their production capacity for yarn in 2013 with an investment of US$ 30 million .

Starting in 2012,  Indorama built two  units of yarn factory - in Purwakarta, West Java, and  Uzbekistan to increase its production capacity in 2013  to 68,000 tons per year  from 48,000 tons per year at present.

PT Viscose Utama Makmur (PT. RUM), a subsidiary of PT. Sri Rejeki Isman (Sritex) which operates in integrated textile industry (spinning and  weaving) has expanded its yarn factory  over a 35 hectare plot of land in Sukoharjo, Central Java,  in July  2012.

PT. RUM  built a yarn factory complete with 45,000 units of spinning machines  with a  production capacity  of  80,000 bales per year  and with a total investment  of Rp 2.5 trillion. Part of the investment was financed by  Islamic Cooperation for the Development of the Private Sector (ICD) in  a loan of US$157 million. The fund was all used to buy  yarn spinning machines  and to build a  power plan, a product of Tex Match Co Ltd  from  China...............






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