Cement sales in Indonesia surged in May, driven by increasing demand in the construction and property sector on the nation’s main island, a trade association announced.
Sales rose 19.5 per cent to 4.1Mt compared with a year earlier, according to the Indonesian Cement Association (ASI). For January through May period, sales climbed 13.5 per cent to 18.4Mt from a year earlier.
“Property and housing needs still dominate the cement market, especially in Java,” Urip Timuryono, chairman of the ASI, said on Wednesday. “Property construction accounted for about 70 per cent of total Java sales.”
The islands of Java and Sumatra dominate the market for cement. Sales on Java reached more than 10Mt, or 54.3 per cent of total domestic sales, in the five-month period, he said. Sales in Sumatra reached 4.4Mt, the second highest of any sales area. But cement sales to overseas markets declined by more half compared with last year, hitting 500,000t as Indonesia’s cement makers boosted domestic sales.
Total sales, for both domestic and export markets, rose nine per cent to 18.9Mt this year. Growing demand in Sumatra was dominated by individual customers, unlike in Java where big property developers were the major buyers.
“Purchasing power increased because of the increasing commodity prices, especially rubber and palm oil, the plantations of which are in abundance [on Sumatra],” Urip said. Security brokerage UOB Kay Hian kept its “overweight” recommendation on the sector, citing stable interest rates, projected infrastructure spending by the government, and robust growth in cement sales. The broker recommended “buy” on major companies Indocement and Semen Gresik.
“Indocement remains our top pick in the sector as it is the market leader in the most developed provinces – Jakarta, West Java and Banten,” Marwan Halim, a UOB analyst, said in a report on Monday. The company’s dominance in those markets would come into play when those infrastructure projects start to materialise, he said.