Pioneer Industries Record Poor Performance In Production

Senin, 03 Februari 2014 | 09:19

Production capacity utilization in a number of strategic sectors recorded poor performance amid the government’s claim about the growing absorption of investment in the manufacturing industry in the past year.

Most sectors that are regarded as pioneer industries had actually recorded utilization below 70% in 2013. This means the claim of additional investment for new plant or business expansion in the past year is not in line with the increase in production.

In fact, the increase in investment is aimed to increase production capacity in line with the assumption of growth in consumer demand following a stable economic condition. On the contrary, market demand will likely stagnate or weaken if the industry stopped the expansion pace.

Indonesian Olefin, Aromatic and Plastic Industry Association (INAplas) Secretary Fajar A.D Budiyono said petrochemical industry utilization throughout 2013 was below 60%. This means, he added, petrochemical industry requires new investment in upstream sector to reduce imports so that this sector will be more integrated.

“The industry needs three additional refineries. The government promised to realize at least one oil refinery,” he told Bisnis, Monday (1/27).

According to him, domestic petrochemical production last year was around 1.8 million tons. In fact, the installed capacity has reached 2.4 million tons. Meanwhile, the needs of polypropylene reached 1 million tons per year. The maximum capacity of local supply is around 800,000 tons per year supplied by three manufacturers, namely Chandra Asri, Polytama Propindo and Pertamina.

This means the rest of the needs must be imported. Despite the industry obtained additional supply in September 2013 from PT Polytama Propindo (Polytama) which once ceases to operate, the production cannot fulfill the domestic demand.

According to him, petrochemical sector utilization is considered at maximum level if reaching to 80%. On the other hand, the performance in downstream sector that is plastic industry is relatively in good condition even though the petrochemical industry utilization remained below 60%.

“There is no problem in downstream because of many new investments. In fact, the utilization is above 80%. Upstream sector should be the focus. The government must optimize it, Pertamina and private sector must work in synergy. There is a big gap.”

Steel Industry

Similar to petrochemical industry, the utilization of steel industry sector remained around 60%-70%. Indonesian Iron and Steel Industries (IISIA) Co-Chairperson Ismail Mandry said low utilization in steel sector was due to many obstacles.

The national steel plant capacity is 10 million tons per year. “The utilization is only about 60%, meaning many obstacles are unresolved,” said Ismail.

In order to increase utilization, he said, the government should create policies that encourage the development of the steel industry. In reality, however, the current economic conditions are actually less supportive.

According to him, there are a number of conditions that constraint the utilization to run optimally, i.e. the weakening of rupiah, minimum wage hike and the government policy to raise electricity tariff (TDL) for industry in May of this year.

“The utilization could be lower this year if the policy remains unimproved. We want to improve utilization but it is difficult. In fact, it can reach 95% if the capacity is optimized but that would be difficult here.”

Other pioneer industry that is not working optimally is machinery. Director General of High Technology-Based Leading Industries for the Ministry of Industry Budi Darmadi said the utilization of the installed capacity in machinery industry depends on its industrial types.

Machinery industry is divided into four categories, namely heavy equipment machinery, agricultural machinery, machinery for power plant, and for machine tools. According to him, the needs of heavy equipment industry reached 14,000 units per year, while the national production is only 7,000 units per year and the remaining is obtained through imports.

Meanwhile, the utilization rate for machine tools remained low. “Small machines can run production here but the medium and large have not been able to run it here.”

During 2013, the heavy equipment industry performance was not very good. Production in 2013 was only about 6,127 units and reached 7,947 units in 2012. The decline occurred as demand began to fall.

In contrast to the steel industry and machine tools as well as petrochemicals, cement industry utilization was fairly good as it reached 90%. Cement production capacity in 2013 reached 61.17 million tons, while consumption was around 58.02 million tons.

Meanwhile, the cement production capacity is predicted to increase by 11% from the total capacities of 61.17 million tons in 2013 to 68.27 million tons.

by Riendy Astria, Arsyad Paripurna