Sales to slow despite extensive infrastructure development
Linda Yulisman. The Jakarta Post, Jakarta - 04/01/2012
The growth of cement sales in the domestic market will probably slow down in 2012 despite the government’s plans to build many infrastructure projects during the year.
Indonesian Cement Association (ASI) chairman Urip Timuryono said in Jakarta on Tuesday that cement sales would rise by only 6 percent to 49.82 million tons this year after recording a 17.5 percent increase to about 47 million tons in 2011.
“Cement consumption will only rise by 6 percent this year because high growth occurred last year,” he said, adding that this was a common pattern in the cement market where high and slow growth alternated every year.
Urip said that as with last year, cement consumption would likely be driven by the property sector, which would contribute around 70 percent to total sales. A number of planned infrastructure projects to be carried out as part of the Master Plan for the Acceleration and Expansion of Indonesian Economic Growth (MP3EI), would not significantly push up cement consumption because they would only constitute 30 percent of cement sales.
“The property sector is expected to see sub 10 percent growth due to the impact of the global economic slowdown, possibly affecting the inflow of investment into the country,” he explained, adding however that growth could possibly be higher if local banks cut their lending rates in line with Bank Indonesia’s recent cut in its benchmark rate.
According to Urip, property projects would be mostly concentrated in Java, while infrastructure projects, such as roads and bridges would be more dispersed in Java and other islands.
“Java will still dominate cement use. Cement consumption outside Java may rise by 1 to 2 percent this year,” he said.
Out of the 44.5 million tons of cement sold throughout the January-November period last year, Java accounted for around 57 percent, according to the association’s data.
Urip said that cement production would rise by 10 percent to 60 million tons this year as there would be additional output from several cement producers that had increased their production capacity, such as state owned cement maker PT Semen Gresik and its subsidiary PT Semen Tonasa, which each added 2.5 million tons of capacity.
Contacted separately, the Industry Ministry’s director general of manufacturing-based industries Panggah Susanto said that domestic cement consumption would likely expand by up to 10 percent this year on the back of rapid growth in the property and construction sector.
“The increase in cement demand will follow economic growth estimated to reach 6.7 percent, as cement is the main material for housing and property. We predict it may rise by up to 10 percent,” he said.
The ministry earlier projected that Indonesia’s cement consumption would break 55 million tons by 2015 and hit 100 million tons in 2020.
Currently the nation’s cement use per capita is only 171 kilograms — far lower than other developing nations such as Thailand and Vietnam, where demand totals 394 kilograms and 564 kilograms respectively — giving sufficient room for future growth.