Market report: Indonesia’s coatings industry poised for growth

Ahead of the Asia Pacific Coatings Show in September, Ahmad Pathoni reports for PPCJ from Jakarta about the Indonesian coatings industry and how it is poised for growth amid regulatory shifts and an infrastructure boom 

Indonesia’s paint and coatings industry is experiencing robust growth, driven by a booming construction sector and government infrastructure projects. However, the industry is also navigating a shifting regulatory landscape and grappling with challenges in raw material sourcing and skilled labour shortages.  

The national sector has reported a robust increase in production, with figures rising from 1.2 million tonnes in 2021 to 1.5 million tonnes in 2023, according to Indonesia’s industry ministry. 

The sector, which supports key Indonesian industries such as construction, automotive manufacturing and furniture production, saw 15.38% growth in 2022 and is expected to expand by 5% to 7% this year, according to the ministry. 

Despite global economic challenges, the Indonesian paint and coating industry’s export revenues reached US$94.4M last year (2023), with potential future domestic sales indicated by imports standing at US$358M, said a ministry official, who highlighted the industry’s integral role in national infrastructure and house building projects. The same applies to the construction of Indonesia’s future capital city, Nusantara, which is scheduled to be inaugurated in August (2024).  

“The paint industry is one of the supporting industries whose growth is closely related to other industries such as infrastructure development, shipping, automotive, decorative and wood finishing industries such as furniture, toys and other creative industries,” said Emmy Suryandari, Director of downstream chemical and pharmaceutical industries at the industry ministry.  

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A promising growth trajectory

An Indonesian market analysis by US-based Inkwood Research said the national paints and coatings market is projected to grow at a compound annual growth rate (CAGR) of 6.47% from 2023 to 2032, reaching US%4.23bn by 2030 [1].  

Growth is driven by government economic reforms, a booming construction industry, and strong demand from the food and beverage packaging sector, with significant investments including Jakarta’s metro network expansion, the report said. 

India-based Mordor Intelligence estimates the Indonesia architectural coatings market value will expand from US$1.67bn in 2024 to US$1.91bn by 2028 [2], with a CAGR of 3.41%. The residential sector is expected to maintain the largest market share, driven by the government’s continuous efforts to accommodate the country’s rapidly growing population (now 275 million people), said Mordor. 

Emmy said the government is playing a crucial role in shaping the paint and coating industry’s trajectory. It has implemented regulations to protect domestic manufacturers, such as imposing import duties on certain coating products, such as Finance Ministerial Regulation No.199 of 2019 [3].  

“The government has provided import duty facilities for the paint industry to encourage it to be more competitive,” argued Emmy.  

Major infrastructure projects, including the development of the new capital city, are expected to significantly boost demand for coatings, Emmy said. The government is also promoting the use of eco-friendly coatings in public procurement, aligning with global trends towards sustainability, she said.  

“Paint used for government procurement of goods and services is required to have an Indonesian National Standard (SNI) Approval Letter for the Use of the Indonesian National Standard Mark (SPPT-SNI),” Emmy added.  

Challenges and the major players

While Indonesia’s coatings industry is experiencing growth and transformation, it is not without challenges, for instance shortages in raw material sourcing and skilled labour, according to Harryawan, secretary general, of the Indonesian Coating Association (ASCOATINDO). 

These problems have “hindered the development of the coatings industry in Indonesia, affecting skills, business growth, and factory production,” stated Harryawan: “However, the industry is now gaining momentum, with numerous new factories coming into operation.”  

While local manufacturers are developing technology and production capacity, they still however rely heavily on imported raw materials, impacting costs and competitiveness, he added: “Most of the raw materials are from abroad, so spending is still mostly overseas,” Harryawan noted.  

As for the shortage of skilled workers with certified training. ASCOATINDO is addressing this by promoting certification programmes and helping develop national competency standards.  

It is also adapting to new regulations and consumer demands for greener products: “In the future, there will be regulations prohibiting the use of solvents because they evaporate, contribute to the greenhouse effect and impact global warming,” Harryawan explained.  

Multinationals, such as the Netherlands-based AkzoNobel, Norway-based Jotun and Japan-based Nippon Paint, dominate Indonesia’s high-end coatings market, particularly for solvent-based coatings, according to the Indonesian Paint Manufacturers Association (APCI – Asosiasi Produsen Cat di Indonesia). One reason is their solid supply chains, helping local branches, given more than 90% of raw materials for these coatings are imported, said the APCI. 

To bolster domestic competitiveness, the Indonesian government is encouraging collaborations between local and foreign firms. 

“We welcome foreign investment, but they must cooperate with small paint factories in Indonesia,” said Yoyok S Hermanto, APCI Head of the human resource committee. The goal is transferring technology and expertise to local players, while ensuring that jobs and economic benefits remain in the country, he said. 

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New regulations focus on sustainability

As for environmental concerns, new regulations are pushing manufacturers towards greener alternatives, with a growing focus on water-based coatings and products with fewer volatile organic compounds (VOC). 

An example is Minister of Environment Regulation No. 73 of 2019 (Permen LHK P.73/2019), which specifically addresses the reduction of VOC emissions from industrial activities and Government Regulation No. 22 of 2021 (PP No. 22/2021), which includes provisions on pollution control and waste management. 

While it has not outright banned lead in paints, the government has promised to eliminate its use by 2030. Several local companies have already achieved lead-free production, such as Mowilex, which has launched the “Mowilex Pasti Aman [Mowilex Guaranteed Safe]” programme to ensure their products are lead-free and support regulations restricting lead use to protect children’s health. 

“Many local products are already lead-free, which is actually something to be proud of for genuine Indonesian local products,” said Yoyok.  

A majority of coatings used in Indonesia are still solvent-based, but there is a growing shift towards water-based paints. Indonesian companies including Mowilex, Propan Raya, Pacific Paint, Citra Warna Abadi, Mataram Paint, and Tunggal Djaja Indah Paint, are all developing sustainable paint solutions, while multinationals are adhering to Indonesian sustainability standards, said Yoyok. 

And he added that “there’s still excess capacity” in the Indonesia sector for such changes to be made: “It’s more than enough for Indonesia, even with the existing factories,” Yoyok said.  

Consequently, APCI has urged the industry ministry to refrain from approving new factories unless they are expansions of existing facilities. Prominent local players such as Propan Raya, Rajawali, Mataram Paint, Citra Warna Abadi and Mowilex continue to expand their market presence, however.  

The ongoing war in Ukraine has indirectly impacted the paint sector due to its effect on global oil prices, which inflated the cost of imported raw materials, noted Yoyok.  

This has intensified competition, already tough because of the government building projects: “We are very enthusiastic and will welcome (the new government’s infrastructure policies),” said Yoyok. “But of course, competition in the Indonesian industry will also become very intense. The small will become big, the bigger can become even bigger, but there are also those who are not ready and will die.” 

The Asia Pacific Coatings Show will take place in Jakarta this September 11-13. For more information, visit: https://www.asiapacificcoatingsshow.com/

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