Indonesian demand expected to rise by 6-7%

Indonesian cement consumption is expected to grow at a similar rate to 2013 despite cement price increases, as producers look to compensate for higher electricity costs and lower growth forecasts.

Widodo Santoso, chairman of the Indonesian Cement Association, told the Jakarta Post that cement demand is expected to rise to 63Mt this year, a YoY increase of 6-7 per cent. Around 1Mt of demand is expected to be met by imports.

Last year domestic consumption reached 58Mt, increasing by about 5.5 per cent from 54.96Mt in 2012, according to ASI data. Last year’s increase was the slowest growth since 2010, with the country having increased by 17.7 and 14.5 per cent in 2011 and 2012, respectively.

The cement industry will also face a new challenge this year as the government plans to increase electricity rates for large-scale consumers in an attempt to reduce the energy subsidy. Earlier this week, the Energy and Mineral Resources Ministry obtained approval from House of Representatives Commission VII to increase electricity rates 38.9 per cent for companies using more than 200kVA and 64.7 per cent for those using 30,000kVA.

Widodo said the increase in electricity rates would force cement-makers, which mostly fall in the category with a 38.9 per cent increase, to raise their selling prices. “We are waiting for the exact bimonthly percentage increase,” Widodo said, adding that cement-makers would likely add about a five per cent increase onto their products to anticipate the electricity increase every two months.