Indonesia’s manufacturers hit hard by Middle East energy shock, domestic gas crunch

THE BUSINESS TIMES
Elisa Valenta

Published Wed, Mar 25, 2026 · 02:06 PM

[JAKARTA] Indonesia’s manufacturers are being doubly squeezed as Middle East tensions drive up energy costs and a prolonged domestic gas crunch curbs supply. This is forcing many factories to scale back output. Against that backdrop, many businesses are urging the government to curb exports and prioritise supply to fulfil local demand.Industry players warn that the dual shock is compressing margins, disrupting production and eroding competitiveness at a time when manufacturers are already struggling to secure reliable gas supplies.

Edy Suyanto, chairman of the Indonesian Ceramic Industry Association, said the industry is now facing a “gas crisis”.Ceramic factories were running at only 70 per cent capacity in the first quarter, below the industry’s 80 per cent target and slightly lower than last year’s 73 per cent average.“We (are upset by) the ongoing gas supply disruptions and urge the government to take immediate action by implementing a domestic market obligation for natural gas and reducing export allocations,” Suyanto said.

Domestic supply crunch

The ongoing conflict in the Middle East has made imported energy an expensive alternative for industries in South-east Asia’s largest economy – a net fuel importer. At the same time, domestic gas production has been disrupted since August 2025, intensifying the supply crunch.The shortfall was largely driven by gas supply disruptions from state-owned distributor Perusahaan Gas Negara. This was triggered by unplanned upstream outages, including maintenance issues, that hit key manufacturing hubs in West Java and East Java.