Indonesia’s power cable industry in trouble

Fierce competition forcing cable makers to consolidate.

Up to three-fourths of Indonesia’s power cable makers could close in the next two to three years as puny margins drive weaker players to sell their businesses. The field will be left to larger companies that could have a stranglehold on Indonesian infrastructure projects.

Indonesia has budgeted US$174 billion for infrastructure development over the next 12 years and about 40% of this amount will go to building power and energy projects.

Competition for infrastructure projects is severe among the 20 major Indonesian cable makers causing sales and profits to slide due to a price war. The weakening rupiah presents more difficulties because these companies must buy copper and aluminum priced in U.S. dollars.

Net margins across the industry have fallen to as low as 2% from 5% to 6% in 2012. Indonesia has six publicly listed cable makers.

Analysts see growth for cable makers but if the situation remains unchanged, the sector could see a consolidation among market players over the next two to three years.