Two of Indonesia’s major cement producers plan to increase their production capacity to meet rising domestic demand, but they remain cautious about potential shifts in market conditions that could push up costs.
Publicly listed PT Indocement Tunggal Prakarsa (Indocement), the country’s second-largest cement maker, said Thursday it expected to raise its production capacity to 21-22Mt, from its current 17.1Mt, over the next four years.
The company is now in the process of constructing a new cement mill in Cirebon, West Java, which is due for completion in late 2009 and will have a production capacity of 1.2Mta.
It is also looking into building another two or three new cement mills, modifying existing kilns and building a new kiln.
Any new mill construction and kiln modification can be completed in 12 months at an investment of $40-$50 per ton of production capacity. A new kiln, however, takes three years to build with a capital injection of $160-$200 per ton of production capacity.
"The realization of the projects depends on the results of our research and market conditions. If coal and raw materials become more expensive, that may cut into our margin too much," company secretary Dani Handayani said.
National demand for cement rose 21 percent in the first semester of this year, driven by high-rise and residential construction. The Java market grew by 17 percent and outside Java 26 percent.
The Association of Indonesian Cement forecasts national cement consumption to grow by seven per cent this year from 32.05Mt last year.