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Indonesian cement sales down in November

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World Cement,

Sales of cement in Indonesia weakened by 5.3% year-on-year in November 2016, according to a new report from Indonesia Investments. Over the year to November, however, domestic sales were up 2.8% to 56.5 million t.

Domestic cement sales have been supported by government investment in infrastructure, as well as drive to increase domestic smelter and power generation capacity. Meanwhile, exports have showed remarkable growth, jumping 52.2 % year-on-year in the first eleven months of 2016 to 1.5 million t.

However, development of Indonesia’s cement production capacity has outstripped demand and is expected to hit the 100 million t mark in 2016, having grown sharply in recent years. This has put pressure on plant utilisation rates, which are expected to fall to 65% in 2016, according to Indonesia Investments, from 76.9% the year before.

Indonesia’s cement sector is dominated by three producers: Semen Indonesia, which holds around a 42% market share, Indocement Tunggal Prakarsa, which accounts for just over 30% of the market, and Holcim Indonesia (around 15%).

A number of foreign-owned producers have, however, recently entered the sector, including Chinese cement giant, Anhui Conch, and Thailand’s Siam Cement, prompting some calls to limit foreign investment in the sector.

Cement producers have also come under pressure from higher coal and electricity prices. Energy-related costs are estimated to account for about 38% of the sector’s total production costs.

“We regard Indonesia’s cement sector in 2017 as ‘underweight’, said Indonesia Investments. “It will require a significant boost in cement demand, stemming from infrastructure development and – most importantly – a rebounding property market before we can become positive again.”

Domestic cement sales are expected to reach 64 million t in 2017, while exports will hit 1.83 million t.

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