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Indonesia’s cement industry is in overcapacity

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World Cement,

Could the cement industry in Indonesia be following in India’s path? Reuters is reporting that massive overcapacity in Indonesia is having a significant impact on shares of the country’s largest cement makers, including Semen Indonesia, Indocement and Holcim Indonesia.

Cement manufacturers have been adding capacity at an increasing rate in anticipation of massive government spending on infrastructure projects, which has not yet materialised. By 2016, Indonesia’s cement capacity is set to reach 75.5 million tpy, but demand is lagging behind. In the first six months of this year, cement consumption was down 4.3% to 27.7 million t.

Earlier this week, Moody’s Investors Service issued a report on the impact of oversupply and greater competition in Indonesia’s cement industry on European producers with subsidiaries in the country. Moody’s is still anticipating consumption growth that will balance out capacity expansion in 2017 – 2018.

Meanwhile, Semen Indonesia is reportedly planning to buy back up to US$70.85 million of its shares to help support the Indonesian stock market.

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