High energy costs and the popularity of polyester are having a negative effect on the production and popularity of nylon yarn in Indonesia. Indonesian nylon yarn producers are faced with unstable and unreliable electricity supply, soaring gas prices, high production costs, and low demand for a complex product.
Gas prices in Indonesia are around USD 9 per mmbtu, more than twice the cost of gas in neighbouring countries like Malaysia and Singapore. While coal is also available as a power source in Indonesia, it is not a suitable substitute for the entire population; additionally, global and domestic initiatives and environmental regulations have forced Indonesia to rely less on coal and more on the country鈥檚 unpredictable and insufficient electricity supply. According to Oxford Business Group, electricity costs comprise more than 25% of total costs in the upstream textiles sector and 1% of total costs in the garment industry鈥攁 significant expense for most Indonesian textile companies.
Though the Indonesian government recently lowered electricity tariffs for labour-intensive industries, including the textile industry, this has not noticeably benefitted the nylon yarn market or the textile industry as a whole. Additionally, the rising prices of nylon yarn across Indonesia and Asia are causing a decline in the material鈥檚 demand. In the Indonesian market, consumers are price-sensitive, and nylon yarn is largely considered to be a niche synthetic material. As the demand for nylon yarn falls and energy-related issues and costs persist, polyester will gain popularity in the Indonesian market. It has a larger consumer base and is less expensive to produce, meaning that manufacturers can generally be sure that their production efforts will lead to profits. Should the Indonesian government continue to help the development of the petrochemical industry, polyester will see even greater demand, especially from upstream textile companies and garment manufacturers.
Despite the obstacles that it faces, nylon yarn does have a chance for recovery. An increase in the availability of energy-efficient and fully-automated machinery for spinning, weaving, and dyeing has the potential to bring interest back to the segment while also allowing textile companies and manufacturers to increase their production, product quality, and efficiency. Innovations in the production of treatment of yarn鈥攊ncluding dyeing, texturizing, and twisting鈥攖hat add value to the yarn can also help to increase demand and recoup productions costs for manufacturers. Additionally, the adoption of alternative and renewable energy sources in Indonesia, including geothermal energy, will benefit the nylon yarn sector and the Indonesian textile market as a whole.
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