Dollar Strengthening Leads to Cost Overruns in Shipyard Industry
The national shipyard industry is facing increasing cost pressures as the US Dollar strengthens against the Rupiah. This condition has led to rising costs for the procurement of imported materials and equipment, amidst rising energy prices and various key raw materials used in ship construction and repair.
The General Chair of the Indonesian Shipyard and Offshore Facilities Institution (Iperindo), Anita Puji Utimami, stated that pressure on the shipyard industry is becoming more palpable due to increasing global economic uncertainty triggered by geopolitical conflicts in the Middle East. She noted that the escalation of conflict involving Iran and the United States, and its impact on international trade routes—particularly in the Strait of Hormuz—has triggered price hikes for various commodities and materials required by the industry.
‘This impact is felt directly by businesses that still rely on raw material supplies from abroad,’ she said in an official statement on Monday.
Data collected by Iperindo shows that B40 diesel prices have increased by up to 89.19%. Additionally, the price of 12kg LPG increased by 16.16% and 50kg LPG rose by 26.51% compared to the previous period. Increases were also recorded in several key production materials. The price of steel plates, a primary material for ship construction, rose between 7% and 12.60%, while ship paint prices increased by approximately 21%, adding to operational burdens.
‘Specifically for industrial fuel usage in shipyards, we hope to receive subsidised fuel from the Government,’ Anita added.
Furthermore, other supporting components such as zinc anodes and aluminium anodes increased by 12.87% and 13.61%, respectively. The price of oil for engine and equipment operations rose between 15% and 40%, while plastic materials increased by approximately 30% to 50%.
Anita explained that the national shipyard industry still maintains a high dependency on imported components, with approximately 45% of material and equipment needs sourced from abroad, making the sector highly vulnerable to foreign exchange fluctuations. Many work contracts were signed when the dollar exchange rate was lower; however, during the procurement and settlement process, businesses must pay at a much higher dollar rate, resulting in significant cost overruns.
To maintain business continuity and ensure service quality, several shipyards have been forced to adjust ship repair tariffs. These increases are estimated to reach approximately 20% as a measure to offset the ongoing surge in production costs. Meanwhile, for ongoing new ship construction projects, industry players are currently conducting discussions and negotiations with ship owners regarding the potential implementation of cost escalations. Iperindo hopes the government can provide attention and support to the national shipyard industry to ensure this strategic sector remains resilient, maintains competitiveness, and supports the growth of Indonesia’s maritime industry.