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View all search resultsGas shortages raise deindustrialization risks
The limited supply of subsidized gas priced at US$7 per MMBTU has forced many manufacturers to source additional gas at prices ranging from $11.5 to $15 per MMBTU.
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A worker works at a ceramics firm, PT Arwana Citramulia, in Serang, Banten. (Antara/Rosa Panggabean)
U
ncertainty over industrial gas supplies may discourage investment and undermine the competitiveness of Indonesia's manufacturing sector, according to Center of Reform on Economics (CORE) researcher Yusuf Rendy Manilet, raising concerns on longer-term industrial growth.
“One of the key risks that needs to be anticipated is gradual deindustrialization,” Yusuf said, as quoted by Bisnis on Sunday, noting that manufacturers were forced to purchase alternative gas supplies with higher costs.
Under the government’s fixed natural gas price (HGBT) program, eligible industries are entitled to gas priced at US$7 per million British thermal units (MMBTU). However, limited supply has forced many manufacturers to source additional gas at prices ranging from $11.5 to $15 per MMBTU.
Indonesian Ceramics Industry Association (Asaki) chairman Edy Suyanto said gas supplied by state-owned distributor PGN had met only around 40 to 45 percent of industry demand under the HGBT scheme during the first five months of the year, forcing manufacturers to source the remainder from more expensive alternatives, such as regasified LNG.
Asaki estimates regasified LNG costs around $21 per MMBTU, pushing average energy expenses to roughly $15 per MMBTU and significantly increasing production costs.
Despite the higher expenses, ceramic manufacturers have largely refrained from raising prices, citing weak consumer purchasing power and intense competition from low-cost imports.
Instead, producers have opted to absorb the additional costs, with profit margins estimated to shrink by around 3 to 4 percentage points. Edy noted that the decline was significant given that most industry players typically operate on margins of only 9 to 10 percent.
