Stronger rupiah gives ceramics industry added polish

The Jakarta Post , Jakarta | Thu, 07/16/2009 12:44 PM | Business

Exports of ceramics are expected to rise this year due to the continued strengthening of the rupiah against the US dollar, an association says.

"Exports may increase this year due to the strengthening of the rupiah following the success of legislative and presidential elections," Achmad Widjaya, chairman of the Association of Indonesian Ceramics Industry (Asaki), said Wednesday in Jakarta.

The local currency recently touched levels of around Rp 10,000 against the greenback, from a previous Rp 12,000 in April.

Achmad said a stronger rupiah would lower production costs, because ceramic production used natural gas as fuel, which was paid for in dollars.

With lower production costs, manufacturers can sell their products in overseas markets at a more competitive price, eventually boosting demand, he added.

In 2008, the value of ceramic exports reached more than US$274 million - an increase of 2.5 percent from 2007 levels.

This year, Achmad said, growth will likely be around that level as well.

Trade Minister Mari Elka Pangestu said the industry's strength was its quality, materials and gas supplies.

She added locally made ceramic products were able to compete against Chinese products, which had overwhelmed international markets.

"Chinese commodities for the most part use cheap glazes, which are notorious for their low quality and safety," Mari said.

The glaze is the layer of coatings applied on ceramics to give added sheen and color. It also serves to protect porcelain ware by preventing them getting easily broken.

However, some ceramic glazes cannot be found in Indonesia, impelling ceramic producers to get much of their supplies from PT Ferromas Dinamika in Cikarang, the country's largest distributor of glazes.

The company is a member of the Ferro Group, a US-based company providing coating systems to ceramic producers in at least 14 countries worldwide.

Glazes account for 35 percent of the total price of a square meter of ceramic tiles, or $2.20.

A recent report from Asaki shows there are 69 companies in Indonesia involved in ceramic production, supported by more than 154,000 employees, with a production value last year amounting to Rp 21.6 trillion. (nia)