Heavy Industry

With a major focus on the mining, agribusiness, construction, and forestry industries, the heavy equipment sector in Indonesia has a bright future in 2018, which can be seen from the positive performance and significant growth of major players in recent years. Heavy equipment distributor PT United Tractors (UT), the largest player in the heavy equipment industry, was able to increase sales by 71% year-on-year (YoY) to 1,488 units during the first half of 2017.

Highlights

  • In 2017, heavy equipment in Indonesia recorded a sharp double-digit growth.
  • Sales of heavy equipment in Indonesia increased substantially by 62% to 7,091 units in 2017 which were incomplete as a whole.
  • Imported products account for around 45% of the heavy equipment market in Indonesia.
  • The largest buyer of heavy equipment is the mining sector, accounting for 60% of total sales.
  • A number of the world’s leading heavy equipment manufacturers have built factories in Indonesia, including those from Japan, South Korea and China.
  • The Indonesian construction equipment market had a value that exceeded IDR 95.9 trillion (USD 6.84 billion) in 2017.

Heavy Equipment Industry Strong Growth in Various Sectors

The demand for heavy equipment continues to be strong due to global demand for commodities. This is in line with the strong growth in the industrial sector that uses heavy equipment, such as mining, agribusiness and forestry. According to the Association of Indonesian Heavy Equipment Management Companies, imported products account for 45% of the heavy equipment market, and local products hold the majority of the market share at 55%.
Mining Sector

The mining sector shows the highest growth for heavy equipment. In terms of volume and market share in 2017, the sales volume of mining machines increased to 3,475 units, covering 173% YoY. This was due to a strong 37% YoY increase in coal prices to above IDR 1.3 million (USD 90) per tonne. The recovery in nickel, tin, iron and gold prices also increased demand for mining machinery. There was a significant increase in the machine market share, from 29% in 2016 to 49% in 2017.

Agribusiness Sector

For the agribusiness sector, the demand for heavy equipment is high from palm oil plantations. Plantation equipment had the second-highest volume growth at 91% YoY, mainly due to the increased production of crude palm oil. Crude palm oil is increasingly in demand in both domestic and international markets. Malaysia and Indonesia rank among the world’s largest producers of palm oil. Together, the outputs of the two countries account for 85.7% of global output. The growing demand is pushing companies to expand and open new plantations — thereby increasing the need for heavy equipment and machinery.

Sales of heavy equipment in the forestry sector also grew by 25% to 993 units, driven by a higher pulp price of IDR 12.8 million (USD 911) per tonne in 2017. The expansion of acacia plantations has also led to increased sales for forestry equipment.

Construction Sector

One of the development priorities for the Indonesian government is the construction sector. The government has planned large-scale infrastructure projects in five priority sectors: transportation, gas pipelines, electricity, water supply and telecommunications. These projects are designed to attract foreign investment and increase annual economic growth.

Seeing the huge potential of the heavy equipment industry in Indonesia, business players are now starting to prepare strategies to take advantage of every opportunity available to expand product types, open new branches, provide innovative solutions and improve the quality of after-sales service.

Major International Player for Heavy Equipment

A number of the world’s leading heavy equipment manufacturers have built factories in Indonesia, such as those from Japan, South Korea and China, for example Sumitomo, Doosan and Sany. Several Japanese investors are also planning to relocate their manufacturing operations to Indonesia.

The increasing demand for heavy equipment in Indonesia is the main attraction for heavy equipment manufacturers such as Sany Heavy Industry Co. from China Ltd. to invest IDR 2.8 trillion (USD 200 million) to increase its production capacity. Sany Group plans to make Indonesia their heavy equipment production center to meet market demand in the ASEAN region, Japan and Australia.

World Market Intelligence shows that the market value of Indonesia’s construction equipment has reached more than IDR 95.9 trillion (USD 6.84 billion) in 2017, up from an initial estimate of IDR 58.9 trillion (USD 4.2 billion) in 2012, and provides the perfect opportunity for foreign investors.

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