Indonesia: Local cement industry pins hopes on government infra spending

Indonesia: Local cement industry pins hopes on government infra spending
Published: 16 February 2009

The cement industry is depending on the promise of the government to pump prime the economy by increasing spending on infrastructure to sustain the growth of construction in the country.

In an interview, Holcim Philippines Inc chief operating officer (CEO) Ian Thackwray said the private construction is on the decline. However, the government’s promise to invest in infrastructure projects will sustain the demand for construction supply.

However, the P100bn infrastructure fund of the government and private sector has yet to be completed. The guidelines for the fund is also not ready yet.

Last year, private construction spending was greater than the government spending. Private spending was 60 per cent of the orders supplied by Holcim. For this year, the demand is expected to even out at 50 per cent public and 50 per cent private.

Public construction is expected to pick up by March when government products start the bidding process.
Last month, Holcim announced they will be shutting down its plant for six weeks as demand for cement continues to weaken.

Thackwray said they are not yet certain when they will implement the shutdown. “It depends. We are very flexible,” he noted. Thackwray said that depending on how the industry performs this year, Holcim may periodically halt operations on their plant.

In 2007, Holcim closed down one of its two cement lines. Thackwray said they will not open the mothballed cement line this year. He said the earliest possible time would be next year.

Holcim is operating at spare capacity and it would be inefficient to run all the lines now. The plant’s full production capacity is 6.6Mta. Holcim refused to say how much they produced last year.

In spite of the slump in the demand, Thackwray said they will not be laying off workers.
With regards to cement prices, Thackwray said that he does not see any increase in prices. “For the moment it is not necessary,” he noted.