Indonesian consumption continues to rise

Indonesian cement consumption continued to rise last month, increasing by seven per cent YoY to 5.47Mt, according to latest data from the Indonesia Cement Association (ASI). The advance marks the second consecutive month of growth with demand being supported by a recovery in the property sector and infrastructure development projects.

Cement sales grew by 4.1 per cent (YoY) to 25.26Mt over the January-May period. Exports also noted a significant increase, rising to 25,000t in May (+60 per cent YoY) and 1.14Mt for the five-month period.

Despite the improvement in the cement demand, Fitch believes it will be a challenge for the industry to meet the ASI's cement demand growth target of 5-6 per cent in 2017, as it will require the government to continue the pace of its infrastructure construction and property developers to accelerate their building plans to convert pre-sales into actual properties. "The major property developers have recorded strong pre-sales growth in the last two quarters, which could provide a fillip to bag cement demand. The completion of infrastructure projects could also spur demand for new properties in areas that were previously under-served by infrastructure," it said in a note.

It cautions that the risk will be a repeat of 2H16, when delays in infrastructure projects and a domestic economic slowdown resulted to flat YoY cement demand growth by end-2016 (1H16: three per cent YoY growth). Moreover, the current strong cement demand in May could be due to construction speeding up ahead of the Islamic festivities in the second half of June, when there are fewer working days that would slow construction and cement demand, the ratings agency adds.