Indocement sees demand up due to Aceh work

Indocement sees demand up due to Aceh work
Published: 07 January 2005

PT Indocement Tunggal Prakarsa, a unit of Germany’s Heidelberger Zement AG, said it expects demand for cement to increase once reconstruction work begins in the tsunami-hit Aceh province, but added that it is uncertain whether the company will derive any financial benefit. As its production facilities are located in West Java, Indocement currently serves only the West Java and Jakarta market. It does not have any receiving facility near Aceh or North Sumatera. Indocement’s investor relations head Sunu Widyatmoko told XFN-Asia that a decision to sell cement to Aceh could prove to be commercially unviable or even counter-productive. But given that the reconstruction could also be seen as a "social" program and will be led by government initiative rather than as a pure market mechanism, it is possible that the company will take part in the work, he said.  

 "The issue relating to Aceh reconstruction is something that the board of directors is still discussing," he said. While honoring free market mechanism, Indonesian cement makers do not really compete with each other partly because the industry is highly sensitive to transportation costs. In Aceh, PT Semen Andalas, a unit of France’s Lafarge, is the dominant player, controlling around 80-90 per cent market share. It has an annual capacity of 1.6Mt.

Widyatmoko said the nearest cement producer to the disaster area is PT Semen Gresik’s unit Semen Padang, "but I believe that Semen Padang already has its own buyers to serve". "I believe demand will be high. If Padang cannot supply the market, then maybe we will," he said. Widyatmoko said the industry is currently producing at 75-80 per cent of its annual capacity of 47Mt.