Poor Indonesian Salt Production in 2023 Leads to Higher Farmgate Prices and Higher Imports Volume

Indonesia is known as the world's 7th largest salt importer, driven mostly by the demand for industrial use. The Indonesian Ministry of Maritime Affairs and Fisheries stated that the country's salt consumption in 2022 amounted to 4 million mt, with 3.2 million mt utilized for industrial purposes and 0.8 million mt for consumption. However, Indonesian salt production has been declining in recent years with production in 2022 decreasing by 18% YoY to 0.9 million mt. In an effort to fill the supply gap, Indonesia imported large amounts of salt in 2022 reaching 2.8 million mt.

Source: The Indonesian Ministry of Maritime Affairs and Fisheries and Trademap

To reduce reliance on salt imports, the Indonesian government initiated a plan in 2023 to boost national salt production to 1.5 million mt. However, key salt-producing regions in Indonesia, such as Madura Island, East Java, Central Java, and West Nusa Tenggara, are projected to experience lower production levels compared to the previous year. The forecast for Indonesian salt production in 2023 indicates a further decrease to 0.7 million mt.

One of the primary factors contributing to the decline in salt production is the recent excessive rainfall experienced in the key producing regions. The wet season compelled producers to halt salt production, as the excessive water adversely affects the quality of the salt. Some areas have not been able to produce any salt since the beginning of 2023 due to adverse weather. Indonesian salt producers are now anticipating the resumption of salt production in July or August, after the end of the rainy season. However, this delay will result in a shorter production period and consequently reduce the overall salt output for the year.

The scarcity of local salt due to lower production levels has caused a significant price increase in recent months. Tridge's farmgate price of salt in East Java has reached an all-time high of IDR 10,000/kg, up by 25% YoY in June 2023. Increased farmgate prices could lead to higher production costs for industrial uses and potentially impact the affordability and availability of salt for domestic use.

Source: Tridge

The decrease in local salt production in Indonesia poses challenges to the government's initiative to reduce reliance on imports. The delayed production coupled with the supply gap between demand and local production, further exacerbates the reliance on salt imports. It is expected that Indonesia needs to import over 3 million mt of salt in 2023 to compensate for the shortfall and stabilize prices in the domestic market. However, the Indonesian government will have to work harder to mitigate the negative impact on local salt producers.