Leading cement manufacturers expect demand for cement to grow at least six per cent on the back of an improving economy and many large construction projects this year.
PT Semen Gresik president director Dwi Soetjipto said Monday domestic demand could even increase more than six per cent if the government manages to realise its planned infrastructure projects.
Last year, the industry grew by 6.6 per cent.
"This is a conservative estimate. We can expect up to seven per cent growth when the infrastructure projects start," he told reporters.
In addition to massive infrastructure projects, Dwi added, the industry would also benefit from better macroeconomics conditions and an improved purchasing power which would lead to more construction of office and house buildings, particularly outside Java.
Dwi cited an example that last year, demand grew by 14 per cent and 11 per cent in Sumatra and Sulawesi respectively, compared to four per cent growth in Java.
"And this trend is most likely to continue," Dwi said.
The company, which currently operates three factories in Gresik, East Java, Tonasa in South Sulawesi and Padang, West Sumatra, booked a 10 per cent increase in sales last year, amounting to Rp 9.6 trillion, from Rp 8.73 trillion in 2006.
It recorded net profits of Rp 1.8 trillion – up by more than 37 per cent from 2006’s Rp 8.73 billion.
Dwi said the company planned to establish two new factories in South Sulawesi and Java at a cost of $671m, with both expected to increase Gresik’s production capacity of around 2.5Mta.
"We have secured the location in Tonasa and expect it to start operating by the end of 2011.
"The one in Java is still in early preparation and is supposed to be completed by the end of 2012," Dwi said, adding that the company would also spend some $557 million to build 10 power plants over the next three years.
The company aims to increase its production capacity to 17.8Mt this year, up from some 17.1Mt in 2007.
Separately, PT Indocement Tunggal Prakarsa said it planned to expand its annual capacity from 17.1Mt to 20Mt in three years, by constructing a new mill in Cirebon, West Java, and revamping three of its existing 12 mills.
"Indocement will allocate between $40 and $45m for the construction of a 1.2Mt line in Cirebon, which will be ready for operation in the second quarter of 2009," Indocement chief financial officer Christian Kartawijaya told reporters on Monday.
The company currently operates nine mills with a total annual capacity of 11.9Mt in Citeureup, West Java, two mills with a combined capacity of 2.6Mt and another one with a capacity of 2.6Mt in Tarjun, Kalimantan.
Christian said the capacity expansion was necessary as they were anticipating a steady increase in cement demand from the domestic market in coming years.