JAKARTA: Industry players reported a 10.8% drop in heavy equipment sales last year, mainly because of lower demand from the mining sector amid a drop in commodity prices.
This year, businesses expect the trend to persist with the possibility of an even deeper plunge.
The Indonesia Heavy Equipment Sole Agent Association (Paabi) stated that only 18,123 units of heavy equipment were sold last year, compared to 20,300 units sold in the previous year.
According to Paabi chairman Etot Listyono, the decrease in purchases in the mining sector was in line with a slump in coal prices over the past year, with similar trends also seen with other minerals.
The coal price dropped by over 62% to US$141.8 per tonne last year from US$379 per tonne in the previous year, while the nickel price fell by over 43% to US$16,500 per tonne in the same period, according to Statistics Indonesia data.
Construction companies, a major market for heavy equipment, have inclined to ‘wait and see’ at least until the general election when future policies will become clearer.
As a result, the association has set a conservative sales target of 14,000 units this year, representing a 25% decrease from last year’s figure.
“I don’t think the sales can return to the 2022 level. This year, most of the demand from mining companies will only be for refreshment (of their current inventory), while purchases from the forestry and agroindustry sectors may remain stable,” Etot said on Jan 31, as quoted by Bisnis.
On the upstream side, the Heavy Equipment Manufacturers Association also projects a more conservative production target for this year at 8,000 units, a 20% drop compared to last year.
Major heavy equipment sellers, such as United Tractors, Hexindo Adiperkasa and Intraco Penta, also expected the demand from the mining sector to remain low throughout 2024, as commodity prices may only bounce back around the end of the year.
United Tractors, which holds around 30% of the heavy equipment market share in the country, only sold 5,061 units of the Komatsu brand as of November last year, a 7.26% drop compared to the same period in 2022.
The firm projects that it will only sell 4,000 units this year, expecting a further drop from already declining sales last year.
The effect extends to spare part sales, which also see low estimates for this year. United Tractors mentioned that the influx of Chinese heavy equipment into the country makes the competition tighter.
This January, Chinese state-owned heavy machinery manufacturing firm Shandong Heavy Industry Group through its subsidiary Sinotruk is set to take a 40% stake in MNC Leasing, a heavy equipment and truck financing company under local conglomerate MNC Group.
Hexindo Adiperkasa plans to diversify its product range to maintain positive topline growth this year.
“With the entrance of new brands, such as Foton, Camino Tandem Road Roller, Dynapac Single Drum Roller and Morooka Carrier Dump, we hope all customer needs can be fulfilled,” Hexindo Adiperkasa’s corporate secretary Listiana Kurniawati said on Jan 9.
Josua Pardede, chief economist at private lender Bank Permata, told The Jakarta Post on Feb 1 that heavy equipment sales would decline to around 13,000 units this year, a 28% decline from 2023.
While the drop may appear to be caused by plummeting commodity prices, he also pointed out that heavy equipment sales have soared significantly in the past two years, even exceeding the 2011 commodity boom and pre-pandemic levels.
According to him, existing players need to find ways to make their products more competitive to counter tighter competition from Chinese heavy equipment companies that tend to have lower prices.
Ahmad Zuhdi Dwi Kusuma, an industry analyst at state-owned Bank Mandiri, opined that the entrance of Chinese products is filling a gap in the market that is caused by lagging supply from existing domestic players.
He said the recent drop in heavy equipment sales may have been triggered by lagging production levels that could not keep up with the demand.
“Some of our clients have mentioned that it is difficult to find heavy equipment. They have also complained about long delivery times and indent schemes,” he told The Jakarta Post on Feb 1.
Zuhdi also pointed out that coal sales and production still saw growth last year.
Indonesia’s coal production reached an all-time high, at 775 million tonnes, last year, according to the Energy and Mineral Resources Ministry. More than 66% of this coal was exported, and the rest was used for domestic consumption.
Bank Permata’s Josua suggested that despite the lack of demand from the mining sector, the heavy equipment sector would receive a push from the construction sector if the government maintains its push for infrastructure development during this election year. — The Jakarta Post/ANN