Indonesia: five cement plants make US$646m expansion

Indonesia: five cement plants make US$646m expansion
Published: 22 June 2010

Five cement producers are completing new investments worth US$645.6m to bolster production capacity by 11.5 per cent or equivalent to 5.38Mta.

The new investment is to bolster national cement production capacity from 46.94Mt to 52.32Mta to anticipate a surge in domestic demand in the next several years.

The five cement producers plan to operate the new facilities commercially starting in the fourth quarter of 2010.

Data by the Ministry of Industry showed the cement producers are PT Semen Andalas Indonesia (SAI), PT Indocement Tunggal Prakarsa Tbk (ITP), and the Semen Gresik Group, which consists of PT Semen Padang, PT Semen Gresik, and PT Semen Tonasa (ST).

Semen Andalas, most of the shares (88 per cent) is controlled by Lafarge (a French cement maker), realises a new investment of US$1.16m in Lhok Nga, Nanggroe Aceh Darussalam (NAD). The company has planned the investment since 2006.

"Semen Andalas has started the construction process and will start commercial production in the fourth quarter of 2010, with initial utilisation reaching 60-70 per cent," informed Director of Downstream Chemical Industry at the Ministry of Industry F. Toni Tanduk yesterday.

In the meantime, Indocement realises an investment of US$180m to optimise cement mill capacity to 1.5Mta in Palimanan, Cirebon.

With the optimisation, the production capacity of the company, a 51 per cent stake in which is controlled by Birchwood Omnia Ltd, increases to 18.6 million this year.

Meanwhile, Semen Padang also has realised an investment of US$103.2m to bolster Indarung VI production facility’s production capacity to 860,000t. As a result, the state-owned cement maker’s production capacity increases to 6.1Mt in 2010.

Semen Gresik has also realised an investment of US$96m to bolster the production capacity of Tuban IV plant in East Java to 800,000t. With the expansion, Semen Gresik now has a total annual capacity of 9Mt.
Toni added Semen Tonasa had also finished expanding its production capacity by 420,000t to 3.9Mt with an investment of US$50.4m.

Therefore, the total installed capacity of the Semen Gresik Group (SGG) this year will increase 12.29 per cent from 16.92Mta to 19Mta.

SGG is a state-owned cement maker owned by the government (51 per cent), Blue Valley Holdings (25 per cent) and the public (24 per cent).

Toni added the cement industry was an energy-incentive manufacturing sector requiring an average electricity of 112kWh.

Therefore, an increase of 5.38Mt in capacity at least requires an additional electricity of 602.56MW.
For plant expansion to outside Java, added Toni, the Ministry of Industry asked cement makers to prepare independent power producers since it would not be enough for the cement makers to rely on electricity supply from PLN.

"Cement consumption in the next five years is estimated to keep on growing by 7-8 per cent, thanks to an upward in demand from the construction and transportation sectors. This is a good sign for cement producers to bolster capacity. However, electricity is also a problem that has to be resolved."

Data by the Indonesia Cement Association (ASI) showed the realisation of domestic cement sales during January-May 2010 surged 14 per cent to 16.1Mt from 14.1Mt during the same period in 2009.