Indonesia: August surge puts consumption growth back on course

Indonesia: August surge puts consumption growth back on course
16 September 2016

The Indonesian Cement Association (ASI) reported that cement sales rose by 8.7 per cent from 5.49Mt in August 2015 to 5.97Mt in August 2016. The surge in domestic sales was driven by the implementation of infrastructure projects in the 2H2016.

With cement sales in reaching 39.07Mt in January-August 2016 (+3.9 per cent), demand growth is edging closer to the five per cent forecast by ASI. "If this consumption level continues until the end of the year, the national cement consumption growth could even be above five per cent," said Widodo Santoso, ASI chairman.

He added cement sales increased rapidly in August due to the progress of previously-delayed infrastructure projects, especially those related to the country’s Power Development Plan. "Construction of the power plants is quite quite vigorous. Housing construction in and outside of Java also started to move," said Mr Santoso. Cement producers also started to feel the rising demand of highway and housing projects as well as rural infrastructure development.

ASI data showed the fastest growth in sales occurred in Sumatra and Bali-Nusa Tenggara. Cement consumption in Sumatra rose 17.6 per cent to 1.36Mt in August, while cement consumption in Bali and Nusa Tenggara advanced 17 per cent. Sulawesi led the sales growth throughout January-August 2016 with a +21.5 per cent rise to 3.39Mt.

Capacity building continues
However, Mr Santoso asserted that sales growth is not proportional to the increase in cement production capacity in Indonesia. "Growth is not worth creating oversupply in the domestic cement market," he added.

The implementation of three new projects by Bosowa Group, PT Indocement Tunggal Perkasa and PT Conch Cement Indonesia has resulted in an anticipated  cement production capacity of 92Mta at the beginning of 2017. This production capacity is expected to turn Indonesia into the largest cement-producing country in east Asia. Capacity is expected to further increase to 100Mt in 2018.

"Oversupply will persist the next 3-4 years. Government policy is expected for cement producers to restrict or suspend the permits of new plant construction, " said Mr Santoso.

The Corporate Secretary of PT Semen Indonesia, Agung Wiharto, said the surge in consumption in August was caused by previously-delayed purchases, especially due to Ramadan in July. He hoped that the positive trend in August can be sustained in the next 2-3 months since consumption of cement normally slows down towards year’s end, caused by the start of the rainy season.

Published under Cement News