Photo taken from Wikimedia Commons

Many are wondering what will the future of the liquefied natural gas (LNG) busines in Indonesia be, especially after the government has failed to win an agreement extension with a consortium of buyers from Japan known as Western Buyers Extension (WBX).

Pri Agung Rakhmanto, oil and gas expert from Trisakti University, said that the present state of the LNG business in Indonesia is that it is overwhelmed by an oversupply that has driven LNG prices further down, while LNG producers from other countries have been selling their products at even lower prices, like LNG producers from Australia, Qatar, Malaysia, and the United States. Pri said this situation could continue for the next two or three years.

According to Pri, the future of the LNG business in Indonesia depends on the ability of policy makers in the government to find new buyers in the market. One option the government could take is to make the Indonesian LNG price more competitive is by reducing the LNG proportion for the government. Pri also mentioned that what’s important is to keep LNG projects going in order to trigger a multiplier effect for the economy.

CEO of PT Chandra Asri Petrochemical Tbk. (IDX:TPIA), Prayogo Pangestu, stated that the company plans to start the construction of its joint venture with tire maker Michelin & Cie (ML) in November.

The new plant, which will manufacture synthetic rubber, is slated to start operating in 2016. It will be located in Cilegon, Banten.

According to Pangestu, the whole plan will involve two stages: First stage requires $500 million investment in setting up the plant and procuring the raw materials. The second stage also requires a $500 million investment to manufacture automotive tires.

Continue reading “Chandra Asri and Michelin’s JV rubber plant to start construction in November”

Indonesian bank, Bank Central Asia (IDX:BBCA) says it is initiating a local credit card network that it plans to start operating early next year. BBCA CEO Jahja Setiaatmadja said that the company will be working with other banks yet to be named to roll out the new network.

BBCA already runs the BCA Card that can be used only within its network. It is already widely accepted within Indonesia, but has very limited use outside the country. The new network, since it will involve other banks, will not be branded BBCA. The company has not indicated what the brand name will be.

BCA’s rival Bank Mandiri (IDX:BMRI) has also stated that it is similarly planning to start a local processing network. BMRI’s CEO Budi Gunadi Sadikin has indicated that it is exploring the possibility of working with other banks to start such network.

Indonesia’s credit card market is worth about Rp180 trillion annually (approx. US$16 bio). According to Bank Indonesia’s Deputy Governor Ronald Waas, 90% of the transactions do not involve any foreign party, so it makes sense to operate a local payment network.

PT Pabrik Kertas Tjiwi Kimia Tbk. (TKIM), an affiliate of the Sinar Mas Group, has started construction of a new pulp and tissue mill in South Sumatra to be operated by its subsidiary PT Oki Pulp & Paper Mills, which it acquired recently in July. According to TKIM Director, Suhendra Wiriadinata, the company is investing $3.1 billion in the new factory, slated to complete in Q2 of 2016.

The company has borrowed $1.8 billion from China Development Bank, using its stake in PT Oki Pulp & Paper as collateral, and will source an additional $800 million from its shareholders for the project.

The new factory will produce 2 million tons of pulp and 500 thousand tons of tissue paper annually. TKIM was established in 1972 as a caustic soda manufacturer, and today it exports about 70% of its sales to Japan, UAE and USA. It has about 13,000 employees.

CEO of palm oil firm Golden Agri Resources, Franky Oesman Widjaja, indicated that the company plans to invest in a biofuel plant to take advantage of the government’s planned import substitution policy.

Aiming to reduce Indonesia’s growing trade deficit, the Energy and Mineral Resources Ministry has issued a regulation requiring diesel fuel to contain a 10% mixture of biofuel, effective as of September 2013.

Widjaja also stated that the company is looking to build the plant near one of state-owned oil firm Pertamina’s refineries for efficiency reasons. He said the plan will involve a minimum budget of US$50-100 million. Golden Agri is world’s second largest palm oil plantation company. It is listed on Singapore’s SGX under the ticker symbol of GGR. Its subsidiary, PT Smart Tbk. is listed on the IDX as SMAR.

Unfavorable commodity prices and general economic downturn are discouraging heavy equipment leasing providers from further expansion. Surya Artha Nusantara Finance (SAN Finance), for example, is planning to diversify into vessel and CPO financing, due to weakening demand in the mining sector.

Multi-financing firm, Chandra Sakti Utama Leasing, saw a 10% decline in loans to the heavy equipment sector, blaming the bearish trend on commodity prices.

Buana Finance, with 71% of its portfolio in heavy equipment loans, reported 14.7% decline in new financing during the first quarter of the year.

Cement sales are set to continue to increase this year, matching the expectations of manufacturers who tried to keep up with demands by opening new plants last year. Among the new facilities opened in 2012 were a new PT Semen Indonesia Tbk. plant in Tuban, East Java, and another in Pangkep, South Sulawesi, belonging to PT Semen Tonasa, which is still affiliated with Semen Indonesia.

Industry association spokesperson Widodo Santoso estimated sales volume to reach 60 million tons this year, an increase over 54.9 million tons in 2012. According to him, February sales showed 8.1% growth over the same period last year, and sales for the first two months of 2013 grew 11.3% compared to 2012, benefiting from strong property growth, especially on the island of Java.

Manufacturers continue to set up new production facilities this year. For example, PT Indocement Tunggal Prakarsa Tbk. has signed an agreement with Tianjin Cement Industry Design and Research Institute Co. Ltd. to set up a new plant in Citeureup, West Java. Swiss manufacturer PT Holcim will also build their second factory near Tuban, East Java, after completing the first facility last year. PT Semen Bosowa is also planning to start operating its new facility in Banyuwangi, East Java, this year.

Dairy processing company PT Indolakto, which is affiliated with PT Indofood CBP Sukses Makmur (ICBP:JKT), held a topping out ceremony of its fifth plant in East Java last week. The new plant, whose construction started in March last year, is expected to begin operations in the second quarter of 2013.

Indolakto’s Vice CEO Irsan Yazid said that the fifth plant will be the company’s largest, and is expected to boost the company’s production capacity by 40 percent. The new plant costs an estimated investment of US$130 million and will produce sweetened condensed milk (SCM), ultra high temperature milk and sterilized bottled milk to complement the company’s four existing facilities in Jakarta, West Java and East Java.

Indolakto is a member of the Indonesian Association of Milk Processors (AIPS), whose six members effectively control the Indonesian market for processed dairy products. The company was founded in 1967 as a joint venture called PT Australia Indonesian Milk Industry, and is majority owned by ICBP after it was acquired in 2008 for US$350 million.

According to a study by the IFC, Indolakto is a major player in the SCM and LM (liquid milk) segments of the Indonesian dairy market and has a significant share in the PM (powdered milk) segment. In the SCM segment, Indolakto’s brands IndomilkCap Enak and Tiga Sapi compete with Frisian Flag’s market-leading brand Susu Bendera, and together the two companies control more than 80 percent market share of the segment. The top four brands in the LM segment are Ultra Milk, Bear Brand, Indomilk and Frisian Flag owned by PT Ultra Jaya, Nestlé, Indolakto and Frisian Flag, respectively.

Growing demands for dairy products, coupled with significant growth opportunities presented by low per capita milk consumption in Indonesia relative to neighboring countries, have attracted investments in the sector. In September last year, Nestlé announced it was investing US$200 million in a new milk processing plant in Karawang, West Java, which it expected to begin production in early 2013.

Government-owned company that operates seaports in Java and Kalimantan PT Pelabuhan Indonesia (Pelindo) III is pursuing five strategic projects to develop Tanjung Perak port of Surabaya, East Java, according to According to PT Pelindo III Public Relations Head Edi Priyanto, those five projects are:

(1). Reconfiguration of terminals in the port to establish them as dedicated terminals. (2). Acquisition of loading and unloading equipments, including seven harbor mobile cranes for the Jamrud terminal. (3). Finishing the construction of Lamong Bay Multipurpose Terminal. (5). Revitalization of the Surabaya west voyage line. (5). Development of an international passenger terminal.

According to Priyanto, the company estimates the Lamong Bay project to require Rp2.2 trillion or about US$246.4 million, and the Surabaya west voyage line revitalization project to cost Rp654.97 billion or about Rp73.33 million.

Earlier, PT Pelindo III Director Djarwo Surjanto said to media that the Lamong Bay terminal construction is expected to complete at the end of 2013 and begin operations in early 2014. The terminal project is part of the government’s master plan to develop and improve economic infrastructures to accelerate the development of the eastern region of Indonesia.

Tanjung Perak port has seen increased container traffic in recent years. Container traffic volume in 2011, for example, was 2,643,518 TEUs (twenty-foot equivalent units), or an increase of about 10 percent over 2010. The port is the main gateway for the transportation of goods to and from the eastern region of Indonesia.