KPPU to monitor cement industry

KPPU to monitor cement industry
Published: 24 December 2003

According to  The Jakarta Post, Jakarta, The Business Competition Supervisory Commission (KPPU) has said that it would keep a watchful eye on cement producers in Indonesia, due to suspicions over a cement cartel in the country. Didik J. Rachbini of KPPU said that the three largest cement producers in this country ­ PT Semen Gresik, PT Semen Cibinong and PT Indocement ­ which hold over 75 percent of the market share, were capable of controlling cement prices in the country.  Therefore, according to Law No. 5/1999, two or three producers holding more than 75 percent of the market share should be constantly monitored by KPPU.  From 1998 to 2003, cement prices in the domestic market have doubled. According to KPPU data, Cement produced by Semen Gresik was priced at approximately Rp 210,000 (US$25) per ton, while in 2003, it rose to around Rp 400,000. Other cement brands like Indocement and Semen Tonasa also showed a similar trend.  Didik said that although inflation had raised the prices of some goods, an increase in cement prices should not be that high because raw materials such as limestone are not expensive.  Therefore, KPPU suspected that the rise in cement prices over the past five years did not represent a rise in production costs, but control of prices executed by a cement cartel operating in Indonesia.

Semen Tonasa research and development director Darusman Mawardi denied the existence of a cartel, saying that the doubling in prices was reasonable because equipment, utility and labor costs were relatively high. He admitted that raw materials for the industry were cheap, but they only accounted for around 1 percent to 2 percent of the overall calculation of the cement prices.  Besides a dubious increase in price, Didik also mentioned that KPPU found dumping practices, done either within the country or in exports. KPPU found that cement was sold at higher prices in areas where the cement factories are located, but is cheaper outside.  Semen Gresik marketing director Hasan Baraja explained that the practice was a marketing strategy because local people were loyal to the local brand. "For example, if Semen Cibinong dared to sell its cement in Surabaya at the same price as Semen Gresik, I guarantee that no one would buy it, not even a bag. It is the same for exports," said Hasan.  Data from KPPU showed that in 2003, cement for export was sold at Rp 263,000 per ton, far lower than the local price mentioned above.