Raising Indonesia29 September 2004
David Hayes reports on one of the largest crane markets in Southeast Asia
Indonesia’s hoist suppliers are looking for an upswing in business in 2005. Extended presidential elections this year caused many private companies to delay planned investments due to the general economic uncertainty preceding the two election rounds in July and September. Industrial investment has been growing for the past four years while state enterprises also have begun investing in new plant recently including new hoist purchases following a lengthy period of underinvestment since the 1997 economic crisis.
Indonesia is a vast archipelago of more than 17,000 islands with a population of 210 million people stretching across 5,000km from North Sumatra in the west across to Irian Jaya in the east. Because of its large population and vast natural resources, a number of leading international equipment suppliers consider Indonesia has the potential to develop into the largest market in Southeast Asia for hoists, cranes and other industrial and construction machinery.
After suffering badly during the 1997 financial crisis, Indonesia faced further problems due to political instability following in the wake of the crisis that resulted eventually in the end of the Suharto presidential regime. Following a change in political leadership, the battered economy eventually started to grow again in 2000 and recently has achieved annual growth rates of 3% to 4% while the annual inflation rate has been running at about 6% to 9%.
Business has picked up for many hoist suppliers during the past 18 months, raising hopes that the market will move up a gear once the ongoing presidential elections are over. One hoist manufacturer looking to increase its market share in Indonesia is KCIï„µKonecranes, which has used PT Technocranes International as its exclusive agent since 1999 when the company replaced Konecranes’ previous agent. Owned by two local shareholders while Konecranes holds a minor stake, PT Technocranes owns a gantry construction yard in the western outskirts of the capital, Jakarta, while electrical and mechanical parts are imported from Finland.
“Business was flat when we started this business and then improved a little one year after we began,” said a PT Technocranes spokesman, “Business has been going up every year since then as the economy is getting better.”
PT Technocranes has sales offices in Indonesia’s major business centres, Jakarta in West Java, Surabaya in East Java and Medan in northern Sumatra.
The company is building a new gantry workshop in Surabaya that is due to open by the end of 2004 as part of efforts to support business growth in eastern Indonesia.
“We looked at Eastern Indonesia and saw that there will be a lot of projects there. Our Surabaya workshop will cover eastern Indonesia,” the spokesman said, “We supply complete cranes including the gantry for all our projects.
“If the gantry is too long we cut it into two sections and join it together on site. We use road transport, so 20 metres is the maximum length. It takes four to five days to deliver a gantry crane from Jakarta to South Sumatra.”
The eastern Indonesian market is mainly equipment for the oil and gas exploration and production industry. Most hoists supplied to this market range from 5t to 15t lifting capacity. Many are installed at onshore sites supporting offshore and remote exploration and production activities.
Areas where oil and gas industry activities are growing include Irian Jaya where site preparation is underway for BP’s Tungah liquefied natural gas plant construction scheme. Gas development also is expanding in East Kalimantan, already a major gas producing region, as the government’s energy policy recently has changed to develop gas reserves for domestic use to replace the rapid rise in oil consumption.
Indonesia’s hoist market is divided into two sectors – the government sector and private sector projects. The state sector includes power plants, railways and the oil and gas industry. Factories account for most private sector hoist purchases including plastics plants, pulp and paper mills, engineering workshops and various other industries, also the construction sector.
“For the past few years there were no government projects but since last year some government projects are going on now,” the PT Technocranes spokesman said. “The political situation has become stable during the past two years. Maybe the international community has started to trust Indonesia again.”
According to industry estimates the Indonesian market for wire rope hoists is currently about 300 to 400 units annually while the chain hoist market is about 500 to 600 units annually.
Wire hoists are sold mainly to power plant operators, pulp and paper mills, the plastics industry and the railways. Chain hoists most in demand generally have capacities of 1t to 2t each and are supplied mainly to small workshops.
Most major hoist brands are sold in Indonesia. Demag is believed to be the largest hoist supplier while PT Technocranes claims to be the other leading supplier.
“Already every crane company is here,” the PT Technocranes spokesman said, “Every customer is tight with their money. Price is important but service is important too. We stock spare parts and can offer a service contract.”
Java is the main market for hoists due to the island’s status as Indonesia’s main population and economic centre. Jakarta, the capital, which is located in West Java, is the largest city with 10 million population, while an estimated 15 million people live in the Greater Jakarta area. Surabaya in East Java is Indonesia’s second largest city with a population of 10 million. Outside of Java the market for hoists is scattered throughout the vast Indonesian archipelago.
Among recent contracts PT Technocranes won tenders in 2003 to supply Indonesian state railways (PT Kereta Api Indonesia) with 35 hoists ranging from 1t to 2t each up to two 25t units which are used to lift locomotives. The hoists were purchased for a plant modernisation and expansion programme at Jogyakarta locomotive workshop in Central Java. More hoists are expected to be purchased for other state railway workshops.
Among current government projects is a tender for two 30t grab cranes to install at the state railway’s Palembang workshop in southern Sumatra. The existing crane was installed in the 1920s and is due to be replaced with the new hoists early in 2005.
Looking ahead, the PT Technocranes spokesman noted that PT Kereta Api Indonesia is planning to expand its South Jakarta locomotive workshop in 2005. A tender for two or three overhead cranes rated at 10t to 15t each is expected to be issued by the year end. The electricity industry is another important source of state-sector orders for overhead cranes. Plans for Perum Listrik Negera (PLN), the state-run national power utility, to upgrade existing power plants and build new stations are expected to result in a series of tenders shortly.
“For power plants we supply hoists for the turbine power house and for the power plant workshop,” the spokesman said, “Currently there is a tender for an 85t hoist for an existing gas-fired power plant in South Jakarta. They want to add a second hoist in the No1 turbine house. They will award the contract this year. For the No 2 power house we supplied a 60t capacity hoist earlier this year and 12 small hand cranes each 1t to 2t in size. The No 2 turbine unit started generating power this year.” Elsewhere, PLN is due to tender a contract for three to four overhead cranes up to 60t each in capacity for its Talahan coal-fired power plant project in southern Sumatra. The power company also is expected to tender contracts for cranes for several coal-fired and hydroelectric power plant projects in Sulawesi in 2005.
The private sector hoist market is growing as well. The pulp and paper industry is expanding, for example. Most pulp and paper mills are located in Java and Sumatra. The major share of pulp and paper output is produced for export.
Noting that most pulp and paper plants install two 10t or two 15t overhead cranes, the PT Technocranes spokesman continued: “The paper industry has automatic roll storage cranes for the finished products warehouse. The cranes automatically stack paper rolls around the warehouse. Konecrane has a division for automatic cranes. We get Konecrane in Finland to design them.”
The plastics industry also is expanding with new plastic factories being built and existing plants being expanded, mostly in Java.“These plants are mostly owned by local investors. Their products are for the local market and export,” the spokesman said, “They supply the electronics industry with plastic casings. Usually they use 10t to 15t cranes.”
Indonesia’s agricultural sector is seeing a growth in palm oil production and milling. New palm oil mills are being constructed in Kalimantan and Sumatra for which 5t hoists normally are needed. “We are optimistic that the situation is going to get better. From 2002 until now the situation has been looking up,” the spokesman said. “Both government and private sector business should improve. Paper and pulp will grow; also power plant expansions as Indonesia still lacks electricity.” Another industrial market that PT Technocranes supplies is the marble and granite cutting industry. Many stone cutting factories are located near Jakarta, close to the country’s major construction market where marble and granite floor and wall tiles and slabs are used mainly to decorate commercial buildings.
Most stone plants in Jakarta cut marble blocks into tiles and slabs while stone factories in Nusa Tengara in eastern Indonesia cut granite blocks. Both marble and granite tiles and slabs are produced for local sale and export. “A lot of people built stone cutting factories before the 1997 financial crisis as there was a demand. Then the crisis happened,” the spokesman said, “Now there is demand again, but there is no need to expand the plants. Most stone factories are equipped with 30t to 40t gantry cranes to move stone blocks around the yard. Then they use 4t to 5t hoists to move the panels after cutting.”
Meanwhile, near term fortunes of the Indonesian hoist market will depend on the results of the September presidential election. At the time of writing, in mid-October, Indonesia seems about to have a change of leader, challenger Susilo Bambang Yudhoyono. Hopes remain high of a smooth transition of presidential leadership that bodes well for Indonesia’s security and investment image overseas. “Our plan is to be No 1 in the market,” the PT Technocranes spokesman said. “There are few projects now so we are waiting to see what will happen with the election. We are optimistic the economy will pick up once the election is over.” H