Java and Sumatra Lead the Way In Booming Cement Demand
Francezka Nangoy. The Jakarta Globe, Jakarta - 22/06/2011
Cement sales in Indonesia surged in May, driven by increasing demand in the construction and property sector on the nation’s main island, a trade association announced.
Sales of the building material rose 19.5 percent to 4.1 million metric tons compared with a year earlier, according to the Indonesian Cement Association (ASI). For January through May period, sales climbed 13.5 percent to 18.4 million tons from a year earlier.
“Property and housing needs still dominate the cement market, especially in Java,” Urip Timuryono, chairman of the ASI, said on Wednesday. “Property construction accounted for about 70 percent of total Java sales.”
The islands of Java and Sumatra dominate the market for cement. Sales on Java reached more than 10 million tons, or 54.3 percent of total domestic sales, in the five-month period, he said.
Sales in Sumatra reached 4.4 million tons, the second highest of any sales area.
But cement sales to overseas markets declined by more half compared with last year, hitting 500,000 tons as Indonesia’s cement makers boosted domestic sales.
Total sales, for both domestic and overseas markets, rose 9 percent to 18.9 million tons this year.
Growing demand in Sumatra was dominated by individual customers, unlike in Java where big property developers were the major buyers. “Purchasing power increased because of the increasing commodity prices, especially rubber and palm oil, the plantations of which are in abundance [on Sumatra],” Urip said.
Security brokerage UOB Kay Hian kept its “overweight” recommendation on the sector, citing stable interest rates, projected infrastructure spending by the government, and robust growth in cement sales. The broker recommended “buy” on major companies Indocement and Semen Gresik.
“Indocement remains our top pick in the sector as it is the market leader in the most developed provinces — Jakarta, West Java and Banten,” Marwan Halim, a UOB analyst, said in a report on Monday. The company’s dominance in those markets would come into play when those infrastructure projects start to materialize, he said.
Semen Gresik, the country’s largest cement maker, accounted for 41 percent market share in the five-month period, compared with Indocement on 31 percent and Holcim’s 15 percent market share.
Domestic consumption accounts for two-thirds of the economy, and companies and small businesses are purchasing building materials for the construction of offices, apartment buildings and shopping malls. The nation’s economy, which expanded by 6.5 percent in the first quarter of this year, is forecast to remain flat at 6.4 percent in the second quarter, according to forecast by the central bank.