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Holcim Indonesia to add two new cement plants in East Java

World Cement,

Holcim Indonesia has announced plans to add a plant in Tuban, East Java in addition to one already under construction as it seeks to meet the country’s rising demand. The total building cost of the first plant is likely to run to US$450 million, and it will have a capacity of 1.7 million tpa when it begins operation next year, and the second facility will have a similar capacity.

The company expects to have increased production capacity 12 million tpa by 2015 from its current level of 8.3 million tpa as housing construction increases and the government pumps more funding into infrastructure projects.

In a recent interview, President Director of Holcim Indonesia, Eamon Ginley, said, “The cement industry here in terms of domestic supply needs to double because the market will grow to nearly 100 million tpa by 2020 – 2021. The prospects for the cement industry are very strong.” Industry data shows that Indonesia consumed 48 million t of cement last year, Ginley expects this volume to expand by 14% this year and at least 10% in 2013.

Indonesian cement companies have outperformed the broader market this year and Holcim is the best-performing stock among three listed cement makers. Its share price has gained 49% in 2012, compared to the 28% increase of PT Semen Gresik (SMGR) and 26% gain of PT Indocement Tunggal Prakarsa. Holcim reported yesterday, 31 October 2012, that its nine-month net income rose to Rp911.2 billion (US$95 million) from Rp740.2 billion the same period a year earlier.

The new Tuban plant gives the company position in the East Java market, as Ginley put it. At present, cement is shipped from West Java or Central Java plants to supply East Java. But with the opening of the Tuban plant, the company will be able to save on these additional logistical costs.

Indonesia has a “very solid plan” to boost economic growth, Ginley said. “In order to do this, you need cement. If you don’t have cement, you can’t have development. That’s why it’s very important for Indonesia that the local industry also continues to invest and meet this challenge.”

As well as further investments by the current players in the Indonesian market to meet these growing demands, such as the US$756 million Semen Gresik has planned to spend on new plants in Sumatra and Java, there is investment coming in from further afield too. Local reports have suggested that Siam Cement are looking to build a new 1.8 million tpa plant in West Java, and Chinese company, Anhui Conch Cement plans to begin construction of a 2.5 million tpa plant in South Kalimantan this year, as well as preparing to acquire land in Manokwari, West Papua, where it will put up another plant.

With the Indonesian economy expanding and the country’s need for infrastructural improvement supporting a booming construction sector, the coming years look promising for Holcim Indonesia, and indeed, the Indonesian cement industry as a whole.

Adapted from various sources by Jack Davidson.

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