PT Indocement Tunggal Prakarsa said it is difficult to raise cement prices for the rest of this year despite higher energy costs as demand has been weakened by high inflation.
“The sector has turned price-sensitive now," Indocement’s investor relations head Sunu Widyatmoko told XFN-Asia in an interview.
“We see that demand is going to be hurt by high inflation and interest rates," he said.
Indocement, like most other manufacturing companies, has been affected by the government’s decision to stop subsidizing fuel prices for industrial buyers since July.
“The policy has caused nearly 100 pct increase in fuel prices,” Widyatmoko said.
In the first half to June, Indocement saw its production costs surging 30 per cent YoY after the government raised fuel prices by an average of 29 per cent in March.
Widyatmoko said energy costs account for nearly 50 per cent of Indocement’s production costs.
He said the cement price was relatively less elastic earlier this year but the company was able to raise prices without suffering a drop in sales volumes and market share.
"In June, we raised prices by 3-5 pct. That caused a decline in volume. In July we did not hike the price and volume was stable as a result," he said.
He could not confirm whether the company tried to hike prices in August but said it is almost certain that Indocement will not make any further price increases this year as the company intends to maintain its market share at around 30 per cent.