1. 5. SUPPLY OF CABLE BASIC MATERIALS 1.5.1.

Type of materials used by cable industry and key suppliers

The main raw materials for cable industry are Copper and Aluminum, where the prices of these materials depend on the LME price (London Metal Exchange), which fluctuates over time. Many cable manufacturers implements hedging materials for confirmed orders in order to secure their profit margin. By the end of 2009, the prices of Copper and Aluminum increased significantly compared to the beginning of 2009 due to the increase in demand and limited supply. This was also a sign of economy recovery after the price declined drastically when the global crisis occurred. Cables mainly made of copper or aluminum, are used to transmit electric current. Copper industries as the upstream sector of cable industry, include copper ore industry, concentrate copper industry, copper cathode industry, copper rod industry and copper wire industry. An aluminum industry which is also an upstream sector of the cable industry includes bauxite industry, alumina industry, aluminum ingot industry, aluminum rod industry and aluminum wire industry. There are many integrated cable industries in the country producing the basic materials and finished products. Table 1.15 Production capacity of raw materials of cable industry and intermediate products of cable industry 2009

Industry
Copper cathode Copper wire rod Copper wire Aluminum ingot Aluminum Alloy ingot Aluminum rod
Source: The Ministry of Industry

Production capacity Number of (tons/year) players

275,000 107,640 411,800 225,000 211,960 108,400 1 6 2 1 28 7

Data of the Ministry of Industry indicated that the utilization rate of production capacity of the above cable raw material industry are quite high, except for copper wire and rod which were only 30-50% of the production capacity.

Table 1.16 Productions of various raw materials for cable industry, 2006-2008 (000 tons) Type of materials 2006 2007 2008 Utilization rate of capacity % (2008)
107.7 94.0 92.4 50.5 30.0

Primary Aluminum ingot Aluminum alloy ingot Copper cathode Copper wire rod Copper wire
Source: Ministry of Industry

251.5 151.5 196.8 139.5 128.8

241.3 178.6 271.5 66.8 126.2

242.4 199.3 254.2 54.4 123.6

Copper cathode Copper cathode is a basic copper product used as a basic material of various copper products such as cable, foil, cu tube, and cu pipe. Its basic material is copper anode. Indonesia has only one producer of copper cathode that is PT. Smelting Co. which has a production capacity of 275,000 tons a year. PT. Smelting which was established in February 1996 is a foreign investment (PMA) company with an investment of US$ 891 million. PT. Smelting produces copper cathode, Anode Slimes, Copper Slag, Copper Telluride, and by products of Gypsum, and Sulfuric Acid. the facility owned by PT. Smelting Co include smelting machine to produce copper anode, refinery to produce copper cathode and acid plant to turn out sulfuric acid and Gypsum. The process of producing copper anode with three furnaces uses the technology of Mitsubishi. Anode with a copper grade of 99.4% is processed into copper cathode, which will have a copper grade of 99.99% through electrolysis. The basic material in the form of copper concentrate is supplied by PT. Freeport Indonesia, a US company having large copper mines in Grasberg, Papua and PT. Newmont Nusa Tenggara, which has a copper mine in Batu Hijau, West Nusatenggara. PT. Smelting exports part of its production to a number of countries in Asia. Smelting is 60.5% owned by Mitsubishi Materials Corp, 25% by Freeport Indonesia, 9.5% by Mitsubishi Corp and 5% by Nippon Mining and Metals Co, Ltd.

Copper Wire Rod Copper wire rod is used as feedstock for copper wires. Copper wire rod generally has a diameter of 8 mm in rolls. The country has six producers of copper wire rod.

Sluggish growth has been recorded in the development of copper wire rod industry in the country. PT. Tembaga Mulia Semanan, Tbk (TMS) has the largest production capacity of 48,000 tons per year. In addition to copper wire rod, the company produces copper wire bars and a number of other copper based products. The company is 33% owned by PT. Supreme Cable Manufacturing, 35% by The Furukawa Electric, Co. Ltd and 10% by Toyota Tsu Sho . PT. Supreme Cable Manufacturing, Tbk itself is 11.81% owned by Furukawa Electric, Co. Ltd. Furukawa Electric, Co. Ltd operates in industry supporting telecommunication industry producing fiber optic cables, optical connectors and fusion splicers.

Four of the six producers of copper wire rod also produce cables. They are PT. Sumi Indo Cable (SIK), PT KMI Wire and Cable Tbk ( PT. GT Cable Metal Indonesia) and PT. Phenolic Prima Indonesia, and PT. Pulung Copper Works. SIK produces electric cables , enameled cables, communication cables and fiber optics cables. PT. KMI Wire and Cable (PTGT Cable Metal Indonesia) produces electric cables from copper and aluminum and telecommunications cables. PT. Phenolic Prima Indonesia produces electric cables and flexible cable. PT. Pulung Copper Works produces aerial cables, electric cables , and low voltage network cables. The basic material in the form of copper cathode used by copper wire rod producers is partly supplied by PT. Smelting. Table- 1.17 Producers of copper wire rod and capacity, 2009
Producers PT. Tembaga Mulia Semanan Tbk PT. Sumi Indo Kabel, Tbk (SIK) PT. KMI Wire and Cable PT. Phenolic Prima Indonesia PT. Pulung Copper Works PT. Multi Tembaga Utama Total
Source: Ministry of Industry

Production capacity (tons/year) 48,000 33,000 15,000 5,600 5,040 1,000 107,640

Location Jakarta Tangerang Jakarta Jakarta Bogor Tangerang

Although PT SIK has quite a large production capacity for copper rod, but the companys financial statement indicated that the company has been no longer earned from copper wire rod over the last two years.

Copper wires

The country has two producers of copper wires PT. Karya Sumiden Indonesia (KSI) with a capacity of 410,400 tons a year and PT. Kawat Mas Perkasa with a capacity of 1,400 tons per year. The copper wires produced by KSI is partly used to feed the cable factory of its parent company PT. Sumi Indo Kabel. Table 1.18 Producers of copper wires and capacity, 2009 Producers PT. Karya Sumiden Indonesia PT. Kawat Mas Perkasa Total Production capacity (tons/year) Location 410,400 Tangerang 1,400 Tangerang 411,800

Aluminum ingot The countrys aluminum ingot industry has not expanded in the past several decades. The largest producer of that material is PT. Indonesia Asahan Aluminum (Inalum) in Asahan, North Sumatra having a production capacity of 240,000 tons a year. The company is 41% owned by the Indonesian government and 59% by a consortium of 12 Japanese companies. It has recorded almost no profit since its came on line in 1983. Shortage in the supply of aluminum ingot in the country is covered with imports as based on an agreement with the Japanese investors, 60% of Inalums production of that material is exported to Japan. The contract with the Japanese consortium will expire in 2013. The consortium wants to extend the contract, but the government has not decided yet whether to extend the contract or to take wholly the control and management of the company. Imports of aluminum ingot, therefore, is almost the same in volume than annual exports by Inalum of around 96,000 tons. Inalums dependence on imports for Alumina basic material makes the company less competitive. Other producers have much smaller capacity. The second largest producer is PT.Liang Ying Nuansa Indonesia with a capacity of only 10,000 tons a year. Many aluminum alloy ingot producers are located in Mojokerto, East Java. Another company, PT HP Metal Indonesia is recorded by the Ministry of Industry as having a production capacity of 60,000 tons aluminum alloy ingot a year . This company is also located in Mojokerto. Indonesia, which has the largest reserve of bauxite, has no processing plant of that basic material and alumina making it difficult to expand the aluminum industry in the country.

Table 1.19 Producers of aluminum ingot and aluminum alloy ingot and Their capacity , 2009
Producers PT. Indonesia Asahan Aluminum PT. Liang Ying Nuansa Indonesia PT. Krakatau Prima Dharma Sentana PT. Pinjaya Logam PT. Rezeki Intilogam Jaya PT. Ingatomas International PT. Master Mas Phosphat Indonesia PT. Naga Agung Mas Indometal PT. Internusa Browns Indonesia PT. Peroni Katya Sentra PT. Mata Mas Metal Indonesia PT. Furin Metal Indonesia PT Walsin Lippo Industries PT Alam Cendana PT Altika Murni Inernusta PT Alumindo Alloy Industry PT Anglo Asia Aluminium CV Bakti PT Berkat Rahmat Jaya PT Global Metalindo Asia PT Gudang Mas Metal PT HP Metals Indonesia PT Makmur Jaya Saputra PT Moltlen Aluminium Producer Indonesia PT Sinar Alindo Metal PT Tamanaco PT Wan Hung Indonesiaq PT Fremont Nusameal Indonesia PT King Modern Metals Indonesia Total Source: The Ministry of Industry Production capacity (tons/year) 225,000 10,000 4,000 4,000 4,000 3,000 1,000 10,000 550 500 400 200 12,000 3,600 12,000 6,750 6,800 3,000 1,000 12,000 1,200 60,000 3,600 32,600 11,160 1,200 800 1,000 5,600 436,960 Location Asahan Mojokerto Cilegon Mojokerto Tangerang Surabaya Mojokerto Mojokerto Mojokerto Mojokerto Mojokerto Mojokerto Cikarang, Bekasi Tangerang Tambun , Karawang Bekasi Cikarang, Bekasi Kapuk, Jakarta Gresik, East Java Bandung, West Java Mojokerto Mojokerto Jatake, Tangerang Cikampek Kamal, W.Jakarta Sidoarjo, East Java Sidoarjo, East Java Mojokerto, East Java Mojokerto, East Java

1.5.2. Basic materials consumed by selected companies

Cable manufacturers procure the raw materials both from local sources and imports. PT Tranka for illustrations, gets the supply of copper rod from PT Tembaga Mulia Semanan and also from foreign suppliers including Thaian of Korea and Transkad of Rusia. The company diversifies the sources of raw materials in order to secure the material supply, because the supply from domestic sources often could not keep pace with increasing demand when there are big projects requring a large amount of cable at certain periods.

Table 1.20. Raw materials used by selected cable producers, 2009 Cable producers Copper Aluminum 1500-2000/ year 10000-15000/ year Others Corning fiber 1500-2000 Source of materials PT TMS ( copper) Corning ( fibre) PT TMS ( Copper) PT KSI ( copper wire) Thaihan (Copper) Transkad ( Copper) Alcarindo ( Aluminium PT TMS ( Copper) PT KSI ( Copper wire) Corning, USA ( fibre) Roxan, Korea ( Copper) Sang Hat ( Aluminium) Waste collector ( copper waste) PT TMS ( copper) PT TMS ( copper) PT TMS ( Copper) PT KSI ( Karya Sumiden Indonesia ( Copper wire) PT TMS ( Copper) PT KSI ( Karya Sumiden Indonesia ( Copper wire)

PT BICC Berca Cable 1000-2000/ year PT Voksel Electric TbK 6000-10000

PT Tranka Kabel PT CCSI

300-600 tons/month 2-5 ton/month

500-1000 ton/ month 50-70 ton/month

1200-2000 ton/month or 9000-15000 km cable/ month

PT Furin Jaya Electric Wire & cable PT Magna Kabel Nusantara PT Phenoloc Prima Mulia Indonesia PT Citra Mahasurya Industries PT Autocomp system Indonesia

30-50 ton/month 50-150 ton/ month 200-300 ton/month 50-150 ton/month

40-80 tons/month 400-600 tons/month

Source: Field researches