Cement sales in Indonesia have reaccelerated in June following a slowdown in the previous month as demand recovers outside of Java. However, a more reduced growth rate is expected through the second half of the year due to a decline in infrastructure development.
Industry sales rose 9.2 per cent to 4.Mt in June, according to the latest data from the country’s leading cement producer Semen Indonesia, citing data from the Indonesian Cement Association. This was compared to growth of just 2.1 per cent in May as sales outside of Java and Sulawesi contracted, marking the slowest pace of growth for 17 months.
Cement sales in all regions outside West and East Nusa Tenggara posted an increase in June. Java consumed 2.8Mt last month, or 57 per cent of the period’s sales, up 6.8 per cent from last year. Sales in Nusa Tenggara contracted by 9.7 per cent, to 267,753t during the month.?Sales at Semen Indonesia, which include Semen Gresik, Semen Padang and Semen Tonasa, rose 18 percent in the six-month period to 12.1Mt. Semen Indonesia, the largest cement maker in Indonesia, held a 44 per cent domestic market.
For the 1H13, cement sales increased 7.5 per cent YoY to 27.83Mt, from the 25.89Mt in the same period last year. The rise was smaller than the 15 percent surge in January to June 2012 from the same period of 2011.
Reasons for slower national growth in the first half include fewer infrastructure projects in the first half, plunging commodity prices that have affected development in resource-rich provinces and more frequent rain, association chairman Widodo Santoso said. "Infrastructure, residential and apartment development remain dominant in Java. Infrastructure projects outside Java have been slow," he told the Jakarta Post.
Sales in Java, the main driver of growth in the first months of the year, rose 9.2 per cent to 15.46Mt. Meanwhile, sales outside Java recorded 5.38 per cent up to 12.37Mt.
A trend of slowing domestic cement sales is likely to continue over the next six months due to a decline in infrastructure development. The realization of ministry infrastructure projects reached 32.9 per cent during the six-month period, with total spending of IDR23.3trn (US$2.33bn) or 29.5 per cent of the total IDR 79trn budget, according to Public Works Ministry spokesman Danis Sumadilaga. Project realization, according to Danis, was 17 per cent higher than in the first half of 2012. Budget disbursement was also higher than the 18 per cent recorded in the six-month period last year. A faster realization of projects is expected in the second half, Danis added, as there will be no further administrative expenses such as finalizing contracts, land clearance, etc. However, disruptions may result from prolonged rainfall, he added.
Meanwhile, some analysts have warned that the pace of growth could soften to around five per cent in the second half of the year as the government raised the price of subsidised fuel by an average of 33 per cent last month, resulting in purchases being curbed.