A slow July in Indonesia, but activity should pick up

Indonesia Investments reports that cement sales dropped 25% in July to 3.7 million t, due in part to religious holidays and the presidential election, as well as declining economic growth. This led to a slowdown in cement distribution, particularly as truck transport was affected by the holidays.

The decline in July is thought to be just temporary; demand for the rest of the year is expected to be strong, given the government emphasis on infrastructure spending. The Indonesian Cement Association is predicting growth in the range of 4 – 5% for the year.

The Indonesia Investments report cites one analyst as predicting peak cement sales in 2017 of 95 – 97 million t. Current capacity stands at approximately 68 million tpa, so considerable investment in new capacity would be required. Already, companies such as Semen Indonesia and Indocement Tunggal Prakarsa are investing in new capacity in anticipation of demand growth.

The Jakarta Post reports that Indocement is planning to invest in two greenfield plants, in North Sumatra and Central Java, respectively. Each plant is scheduled to have a capacity of 2.5 million tpa and would begin production in 2018. The total investment per plant would be US$100 – US$150 million, funded from the company’s own cash. Last year the company started work on a brownfield plant with capacity of 4.4 million tpa of cement, which is due to begin operations in 4Q15. Indocement spent only 20% of its total anticipated capital expenditure (capex) in 1H14, according to another article in the Jakarta Post.

Edited from various sources by Katherine Guenioui

Read the article online at: https://www.worldcement.com/asia-pacific-rim/11082014/a-slow-july-in-indonesia-but-activity-should-pick-up-267/