Posted on 18 Jun 2015
Indonesian Cement Sales Plunge Most in 6 Yrs, Hope on Infrastructure Projects
The latest data from the Indonesian Cement Association (ASI) show that
cement consumption in Indonesia declined 3.8 percent (year-on-year) to
22.9 million tons in the first five months of 2015 (from 23.8 million
tons of cement in the same period last year). This fall is the steepest
decline in Indonesian cement consumption since 2009 when demand plunged
nearly seven percent (y/y) amid the impact of the global financial
crisis. The current decline is caused by the country’s
economic slowdown and falling commodity prices outside Java.
A report from Mandiri Sekuritas also mentions that the entry of a new
player (Semen Merah Putih) in Indonesia’s cement industry as well as
the opening of new cement plants of established players have caused
additional pressure on cement prices and may lead to an oversupply.
Meanwhile, the central bank (Bank Indonesia) remains committed to its
relatively high interest rate environment with the country’s key
interest rate (BI rate) at 7.50 percent in a bid to combat high
inflation, curb the wide current account deficit and limit capital
outflows ahead of further monetary tightening in the USA. Higher
borrowing costs curb property demand. However, Bank Indonesia has
announced to lower down payment requirements for the purchase of
property in an effort to boost the industry.
Cement sales are one of the key indicators to measure the state of
the economy, particularly in the property and infrastructure sectors.
The Mandiri Sekuritas report states that growth in Indonesia’s
infrastructure spending was relatively flat at -0.6 percent (y/y) so far
in 2015. However, Head of the ASI, Widodo Santoso, expects cement sales
to rebound on the back of government-led infrastructure projects in the
second half of 2015. These projects include the Trans Sumatra toll
road, the Manado-Bitung toll road and the Medan-Kuala Namu toll road, as
well as smelters, power plants, the Jakarta Mass Rapid Transit (MRT),
railway projects and port development across the archipelago. Santoso
eyes domestic cement sales of 62 million tons this year, up 3.5 percent
from 59.9 million tons in 2014. Next year he expects cement demand to
increase to 69 million tons.
Indonesian Cement Sales 2008-2015:
| Year |
Cement Sales
|
YoY Growth
|
| 20151 |
62 million |
+3.3% |
| 2014 |
60 million |
+3.3% |
| 2013 |
58 million |
+5.6% |
| 2012 |
55 million |
+14.6% |
| 2011 |
48 million |
+20.0% |
| 2010 |
40 million |
+4.2% |
| 2009 |
38.4 million |
+1.1% |
| 2008 |
38 million |
- |
1 ASI target
Source: Indonesian Cement Association (ASI)
Meanwhile, the ASI sees total cement plants’ capacity at 75 million
tons in 2015 and at 92.8 million tons next year following the start of
production of several large cement factories including Semen Padang and
Tiga Roda.
In May 2015, Indonesian cement sales particularly declined in
commodity-driven provinces such as South Kalimantan (-41 percent y/y)
and East Kalimantan (-24 percent y/y).
Indonesia’s largest cement producer
Semen Indonesia saw its market share decline from 44 percent to 43.3 percent so far this year, while the country’s second-largest producer
Indocement Tunggal Prakarsa saw its market share fall from 30.5 percent to 29.2 percent over the same period.
