Demands for heavy equipment are expected to increase as the government has kicked off several infrastructure development projects, boosting confidence among machinery manufacturers, which saw flat growth in past months.
Local heavy equipment producers are currently suffering from falling global commodity prices as it affects mining and plantation activities in the country. Indonesia saw 4.7 percent growth in the first quarter of the year — the lowest since 2009.
With the government beginning infrastructure projects recently, such as the ground-breaking ceremony of the Solo-Kertosono toll road, demand for heavy equipment is expected to increase slightly in the next one to two months, according to I Gusti Putu Suryawirawan, the Industry Ministry’s director general of metal, machinery, transportation equipment and electronic industries.
“We hope ministries with high budget allocation, such as the Public Works and Housing Ministry, kick off the tender process soon so that construction activities could be seen. Eventually, demand [for machinery] will rise,” Putu said recently.
Based on reports submitted to the ministry, Putu said local heavy equipment producers were seeing a growing number of unused vehicles and machinery due to the falling demand in mining, plantation and construction sectors since the fall of global commodity prices took effect in late 2012.
The growing number of unused machines was also prompted by Indonesia’s mineral ore export ban and a delay in the disbursement of government spending due to the changes of nomenclature in several ministries and a late approval of the revised 2015 state budget, Putu added.
Putu said the potential demand increase would help local heavy equipment manufacturers see better results in the third quarter of this year as they suffered a 30-40 percent decrease in production in the first half due to weak government spending.
“The output of the heavy equipment industry in the third quarter of this year will still decrease by around 10-20 percent compared to the same period last year, but it is an improvement if we compare it with the 30-40 percent decline in the first and second quarters,” Putu said.
Separately, Indonesian Heavy Equipment Manufacturers Association (Hinabi) chairman Jamaluddin likewise said accelerated government spending in the second half of this year would trigger more activities in the construction sector and reduce the amount of unused machinery.
Jamaluddin meanwhile expressed his concern about the Industry Ministry’s latest collaboration with state weapon producer Pindad, which is currently in the process of manufacturing its first order of heavy machinery to support government infrastructure developments.
“Local heavy equipment producers currently see a number of unused products. With this condition, we hope it will be nice if the Industry Ministry sees the opportunity to synergize with us,” Jamaluddin toldThe Jakarta Poston Friday.
Jamaluddin said the amount of heavy equipment that is absorbed and used in projects currently stands at around 40-50 percent of the industry’s total production, which was targeted to achieve at least 6,000 units by the end of this year.
The target is far lower than the industry’s annual production capacity of 10,000 units, he added.
“We were initially hoping to produce at least 6,000 units this year if there was a demand for improvement, but production can be as low as 5,000 units if different situations occur unexpectedly. The excess of unused products will also increase if there is no improvement,” Jamaluddin said.
Indonesia’s domestic heavy equipment production stood at 5,172 units last year, a 15 percent decrease compared to the earlier year, according to Hinabi’s data.
Industry Minister Saleh Husin recently said that large-scale excavator units produced by Pindad would be ready by the end of June as ordered by his ministry in March. The order was based on the request by the Public Works and Housing Ministry, which has the largest allocated fund of Rp 118.5 trillion (US$8.9 billion) in the 2015 revised state budget.