MARKET INTELLIGENCE REPORT ON
SUGAR INDUSTRY IN INDONESIA
September 2007
Current Issues
The country's sugar industry has declined in the past decade both in production and plantation areas despite improvement in the past two years.
The country's sugar production in the past decade shrank by 1,8% annually on the average and the plantations have not changed from 340,000 hectares in the past five years, The sugar content is also declining - with productivity down from 76.9 tons per hectares in 1990s to 62.7 tons in the 2000s.
Hoping to improve the performance of the industry, the government has announced plan to revitalize the industry with a production target set at 1 million tons in 2009.
Revitalization is aimed at increasing the production capacity of sugar factories, productivity and content of sugarcane and expansion of plantation.
At least 20 sugar factories have been proposed by industrialists to be included in the revitalization program, which is expected to have support from the banking industry. Revitalization of the 20 factories also including expansion of plantations is estimated to cost Rp 4.13 trillion.
Meanwhile the country's products of doubled refined sugar as a basic material for food and beverage processing industries are facing imported products, which are more competitive in prices.
Large imports of cheaper in price doubled refined sugar also have impact on the market of consumption sugar in the country.
Acreage of sugar plantations expanded
The biggest problem faced by the country sugar industry is shortage in supply of basic material as a result of shrinking plantation areas and the productivity of plantations.
Data at the Directorate General of Plantation Produciton Development show that in the past nine years, sugar plantations and productivity have declined significantly.
Many sugar factories, therefore, have operated below their installed capacity leaving large idle capacity. The industry, therefore, has low efficiency. A number of sugar factories in Java have a milling capacity of 23.8 million tons of cane a year but they have only a supply of 12.8 million tons of cane a year. As a result they operate only at around 53.8% of their capacity.
Sugar factories outside Java have a processing capacity of 14.2 million tons of cane but annual supply of basic materials averages only 8.6 million tons leaving idle capacity of 39.4%.
Sugar plantations in areas are still dominated by smallholders plantations accounting for 50% of the total plantaiton areas.
Expansion of sugar plantations began in 2004 to 344,793 hectares up from 335,725 hectares in 2003. The plantations expanded further to 422,734 hectares in 2005 after the government set a target to achieve self sufficiency in 2007.
More than 50% of sugar factories older than 100 years
It has been a long known fact that the country's sugar industry has been outdated in technology using old machines, therefore, no longer efficient. The cane content fell to only around 6%-8% from 12% when the country was known as the world's largest sugar producer during the Ducth colonial time. Revitalization, therefore, has been too late. Around 30 units of 59 sugar factories in the country have been more than 100 years in age.
The oldest is the Gending sugar factory in East Java coming on line in 1830 now having a milling capacity of 1,300 tons of sugarcane a day.
Most sugar factories in the country use the process of carbonization and treatment with sulfite turning out sugar with color of IU (ICUMSA) around 110-370..........................