Industry Profie: Cable Manufacturing Industry in Indonesia

MARKET INTELLIGENCE REPORT ON

DEVELOPMENT OF CABLE MANUFACTURING INDUSTRY IN INDONESIA

March 2009

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Cable exports up

The slump on the domestic market in the wake of the monetary crisis of 1997/1998, forced cable makers in the country to seek to boost exports to offset a decline in sales on the domestic market. Exports, therefore, began to rise in 2000 and the trend continued until 2007. In 2004, exports totaled 66,600 tons valued at US$ 287 million, up to 111,600 tons valued at US$ 917 million in 2007 or an increase of 20% a year.

Previously exports were made mainly to Japan, the Philippines, Bangladesh and Sri Lanka, but in the last two years, the Middle East has become the main export destinations. The construction industry marked with rising property buildings is brisk following the oil boom in the oil rich region. New cities have been built or being build requiring larger supply of cables mainly electric cable and telephone cables.

Currently cable makers are more oriented to export market. PT Sumi Indo Kabel, for example, exports most of its cable production. In the first half of 2008, the company exported 83% of its production leaving only 13% for domestic market.

PT KMI Wires and Cables Tbk

PT KMI has recorded an increase in its exports although most of its production is still disposed of on the domestic market. In 2007, sales on the domestic market made up 84% of its total sales with exports making up only 16%. In the first half of 2008, its exports rose in contribution to 25%. Its export markets have expanded to South America, Africa and Europe.

PT KMI said demand for cables have increased in Middle East in the past two years especially before the financial crisis in 2008. Large property projects and construction of new cities pushed up demand for cables especially electric cables.

In 2007 and 2008, around 70%-75% of exports by PT KMI were to Middle East. Other export regions accounted for the remaining 25%-30% of its exports. Growing exports have boosted production by the company prompting it expand production capacity. It plans to expand its capacity by 25% by phases until 2010.

PT SUCACO

PT Supreme Cable Manufacturing & Commerce Tbk recorded sales valued at Rp 2.3 trillion. That year its exports were valued at Rp537.6 billion or an increase of 413.45% from Rp104.7 billion in 2006. Middle East is its largest buyer.

Other cable makers such as PT Voksel Electric Tbk also increased exports. Voksel exported cables valued at US$3 million to Middle East in 2007.

Indonesia exports various types of cable. The largest in volume is electric cable with voltage of more than 1000V (HS. 8544.60.000) totaling 33,000 tons in 2007 and telecommunications cable (HS 8544.49.39000 totaling 25,200 tons. The largest exports in value were wiring harnesses for motor vehicles (HS 8544.30.1000) valued at US$ 338 million in 2007.

Imports

While exporting, the country also imports cables. Imports have increased in the past four years in line with the growing demand in the country. Imported cables are mainly fiber optics and industrial cables

In 2004, imports of cable reached 20,772 tons valued at US$ 83,428,000 up to 50,003 tons valued at US$ 222,186,000.

Consumption growing

A fast growth has been recorded in the country's consumption of cables in the past four years peaking in 2007. In 2004, consumption totaled 65,400 tons, up to 227,700 tons in 2007 or a three fold increase from the previous year.

The increase in consumption in 2007 came with the launching of the government's crash program in the electricity sector. Under the first crash program state electricity company PLN is to build coal-fired power plants with a total capacity of 10,000 megawatts. Outside the program a number of power plants have been built in Java and other regions to cope with shortage in power supply.

In 2008, ..........................

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