With a population of more than 630 million people, ASEAN region is one of the most important markets and most global ceramic tile markets. With a cumulative production and consumption in excess of 1.4 billon square meters, the ASEAN ceramic tile market has grown at very steady rates in recent years. Currently, the largest producer, Vietnam and Thailand are experiencing a sluggish market, but the prospects of overall regional industry seem bright in the short and medium term.

 

Currently, led by Indonesia and Vietnam and supported by Thailand and Malaysia, ASEAN tile manufacturing is steadily giving tough competition to Chinese tile imports in the region. Along with the capacity expansions, ceramic tile producers in the region have embraced state-of-the- art technology in an increasing manner.

 

l Indonesia

Largest ceramic tile producer in ASEAN block, Indonesia is home to more than two dozen large-scale ceramic tile manufactures. Capacity of Indonesia ceramic tile industry grew by 7.7% in 2015 to reach a total of 560 million square meters. However, since the industry was starting to show signs of decline, there was a significant decline in capacity utilization.

From production and consumption point of view, Year 2015 was a tumultuous year for Indonesia ceramic tile producers. The country’s ceramic tile production registered a historic decline in terms of percentage. Though, Indonesia recorded economic growth by 4.79% in 2015 and was among the highest in emerging market economies. However, when compared to 2014, the economy slowed-down from 5.02% to 4.79% and most sectors, including construction and real state, which had a cascading affect on ceramic tile industry.

Ceramic tile sales remained sluggish even in the first quarter of 2016 with total sales of around 90 million square meters in Q1-2016, stagnant from sales in the same quarter last year. In full-year 2015 Indonesia’s ceramic sales plunged by more than 20 percent year on year to 360 million square meters. The nation’s ceramic industry has been plagued by Indonesia’s slowing economic growth, particularly the slowdown in Indonesia’s property sector. Contrary to earlier predictions-Indonesia’s property sector has not shown a real improvement in 2016 and therefore ceramic sales has not picked up yet. Indonesia tile producers hope to see a rebound in the second half of 2016 on the back of accelerated economic growth. Government-led infrastructure development, which is estimated to the key ingredient to push Indonesia’s economic growth up to 5.3 percent (y/y) in 2016, should give a boost to property development and ceramic tiles consumption.

According to Elisa Singa, Chairman of the Indonesian Ceramic Industry Association (ASAKI), “ We are confident the current downward trends will reserve in second half of 2016. Indonesia is pushing through large-scale infrastruture and residential construction projects, which will boost ceramic sales in coming year.” Given expectations of improving macroeconomic conditions, ASAKI expects to see Indonesia’s ceramic sales rising to around 11 percent to 400 million square meters in 2016.

 

 

A rapid growth in domestic capacity in recent years along with a drop demand in 2015 has pushed down prices of ceramics tiles and threatens to erode profit margins at least until demand catches up with supply. According to ASAKI, oversupply has caused prices to fall by more than 30% in East Java, where most of the additional capacity is entering the market.

Despite the large size of country’s ceramic tile production capacity, Indonesia ceramic producers have largely failed to tap export markets due to high production costs. Although the Indonesia government announced to lower gas and electricity prices for labor-intensive industries in an effort to support these industries amid the economic slowdown (this was part of the government’s third economic stimulus package, unveiled in October 2015), energy prices remain high and causes Indonesian ceramic tiles to be more expensive compared to tiles produced in other ASEAN nations.

 

Ceramic Tile Production in four major ASEAN countries (Unit: million sqm)
country	2015	2014	2013	2012	2011
Indonesia	360	455	413	385	361
Vietnam	384	365	350	330	345
Thailand	259	267	249	235	224
Malaysia	101	94	92	86	80

 

Ceramic Tile Consumption in four major ASEAN countries (Unit: million sqm)
country	2015	2014	2013	2012	2011
Indonesia	353	404	382	358	340
Vietnam	327	300	292	276	290
Thailand	231	241	229	212	197
Malaysia	94	88	87	80	76

 

 

 

l Vietnam

Vietnamese ceramic industry's rapid growth in last decade has taken the global ceramic tile industry by surprise. Rapid capacity expansions by existing players and new players have catapulted the ceramic tile production in the country to new heights. The country is neck-in-neck in competition with the largest producer of ceramic tile producer, Indonesia. In comparison to the other three prominent producers in the region, Vietnam enjoys the lowest cost of production on account of cheapest labour cost in the region. Low cost model of the country has made ceramic tile producers in other countries of the region to enter into joint venture with local tile producers in order to take advantage of low cost of production in the country.

Catered by five large, about a dozen medium and 30 small producers, Vietnamese ceramic industry has registered the healthiest growth rate in last few years among the ASEAN countries. In 2015, the country's ceramic tile production and consumption grew by 5.5 and 9% respectively.

"This is a good opportunity to become the market leader of ceramic tiles in Vietnam. Prime Group recorded total revenue of 8.3 billion baht in 2015, showing high demand."According to SCG's president and CEO Rungroj Rangsiyopas.

Another major producer (Chang Yih) has invested significantly in its production line to offer product differentiation. In 2015, the company spent US$I million on three color 3-D printers and almost $1 million on high-tech pressing machines in order to produce high-end products.

According to Tran Van Sinh, Deputy General Director of Chang Yih Ceramics, "We have spent a lot on new technology to catch up with new trends. Our production lines were imported entirely from those countries that have a strong ceramic tile industry such as Italy and Spain, costing millions of dollars."

He further adds, "Leadership in the premium segment, with the aid of new state -of-the-art technology will help the company cash in on premium property projects by domestic and foreign investors, which have high demands for tiles with high quality, good designs and competitive prices.