Indonesian cement producers see sales declining next year

Indonesian cement producers see sales declining next year
Published: 26 November 2008

Indonesia’s two top cement makers, PT Semen Gresik Tbk and PT Indocement Tunggal Prakarsa, expect demand to decline next year amid tougher economic conditions.

In the past years, cement demand has been growing in Indonesia as lower interest rates have boosted the construction of infrastructure and residential projects.

Domestic cement consumption rose 6.6 percent last year to 34.17Mt, higher than an industry forecast of around 5 percent.

In June, Indonesia’s Cement Association forecast cement consumption could grow by around 7 percent this year, partly helped by the government’s infrastructure projects, provided interest rates did not not rise too much.

’Obviously next year’s demand will not be as good as demand in 2008. Internally we project 3.8 percent growth for domestic cement sales,’ said Heru Adhiningrat, a director at Semen Gresik.

Separately Indocement’s chief financial officer, Christian Kartawijaya, also expected a decline in demand, saying that ’sales volume in 2009 may be flat or down by five per cent’ amid a mild slowdown in the economy.

The central bank, however, has raised its key interest rate six times this year, bringing the rate to 9.50 percent, as annual inflation accelerated to a two-year high of 12.14 per cent in September.

The cement association has not released a new forecast on growth amid the volatile market conditions. Analysts say the interest rate hikes and looming inflation could put a brake on consumption growth.