16 Feb 2014

Air Battle in Indonesia

Industrial gas has a promising outlook. Who doesn't need gas?

Oxygen is needed by hospitals to take care sick people, nitrogen keeps your chips crisp till you tear the bag, car makers use acetylene for welding, and so on. As the economy grows, demand for industrial gases rises. Despite being the biggest player in the industry, the Samator group is innovating to maintain its leadership.

Through its wholly owned companies, PT Samator and PT Aneka Gas Industri, it now holds almost 50% of the market with estimated sales of almost Rp 2 trillion combined. His two closest competitors are multinational firms, France’s Air Liquide and Germany’s Linde group. “Competition is getting tougher and tougher,” says Rachmat Harsono, executive vice president of corporate finance and strategic planning for Samator, who is the son of Arief Harsono, the group’s founder. Samator group started in 1975. Its name comes from the name of the capital of East Kalimantan, Samarinda, and Toraja, an area in South Sulawesi. Arief had the idea to start the company while traveling between these two places.

Industrial gases are made using processes that are complex and capital intensive, and require highly skilled staff, thus making barriers to entry high for new players. Rachmat says some producers have recently dropped prices to gain market share. “The latest technology is more efficient, so costs can be lowered. But we rely heavily on electricity and electricity prices have increased. So when the price of industrial gasses is going down in the market, it is actually not healthy for the industry,” Rachmat says.

Source : Forbes Indonesia