Indonesia: Lafarge update on its possible IDR5tn investment in northern Sumatra

Indonesia: Lafarge update on its possible IDR5tn investment in northern Sumatra
Published: 04 July 2011

Lafarge SA, the world’s largest cement producer, reaffirmed its commitment to building a cement plant in Langkat, northern Sumatra, with an investment of up to IDR5trn (US$585m), Indonesia’s industry minister said.

Industry Minister MS Hidayat announced Sunday that Lafarge was currently finalising a feasibility study for the project and exploring sources of raw materials in the area, while also designing an environmental impact analysis to be submitted to the Environment Ministry.

"If all runs well and Lafarge can get an investment permit from the BKPM [Investment Coordinating Board] at the end of this year, construction of the plant will start at the beginning of next year," Hidayat told The Jakarta Post via telephone.

The construction of the plant, which has a planned capacity to produce 1.5Mta of cement, would be in line with the government’s efforts to shift investment away from Java to other islands and support the country’s new economic master plan, he added.

Hidayat said he had asked Lafarge to allocate most of its production for the domestic market with possible exports to neighbouring countries when local needs had been fulfilled.

He said that apart from the Langkat plant, Lafarge was eyeing the possibility of setting up another plant in East Java.

The French firm had initiated early moves, including discussions with state cement producer PT Semen Gresik, Hidayat said.

Earlier this year, Lafarge began operations at its new cement plant in Lhok Nga, Aceh, with a cement capacity of 1.6Mta, which replaced a plant damaged by the 2004 tsunami. The construction project, which began in 2007, cost US$300m.

The Industry Ministry estimates that domestic cement consumption would grow by between 7-10% annually, with demand expected to reach 55Mt by 2015 and break 100Mt in 2020.

The Indonesian Cement Association (ASI) estimates that total cement production this year would increase 4.97% to 43Mt from 41Mt last year, in line with surging domestic cement consumption of 6% to 42.4Mt this year from 40Mt last year.

The increased domestic demand for cement has led to a number of global cement  producers pouring investments into Indonesia.

Chinese firm Anhui Conch Cement Co Ltd expressed its commitment last week to building four cement plants in East Kalimantan, West Kalimantan, South Kalimantan and West Papua, with an overall investment of US$2.35bn.