Displaying items by tag: Indonesia

Indonesia: It seems that not a week goes past without a forecast, announcement or other report about the continued boom in the Indonesian cement industry. Similarly, there is a steady stream of expansion announcements to accommodate the future demand. In light of another round of impressive cement statistics, what's the story for Indonesia in 2012 and beyond?

In the three months to 31 March 2012 Indonesia produced 12.5Mt of cement, an 18% rise on the first quarter of 2011. In the whole of that year, the cement industry turned out a massive 17% more cement than in 2010. These headline increases are certainly impressive and show that if the first quarter of 2012 was repeated three more times throughout the rest of the year, Indonesia would hit its 53Mt production forecast. This is more than double the cement production of 1998 (22Mt/yr in the midst of the Asian banking crisis) and, while from a low base, the values represent incredible sustained year-on-year demand growth.

But what is the potential of the Indonesian cement industry? This can be assessed by looking one of Indonesia's neighbours, namely Malaysia, and doing a quick thought-experiment. What would the Indonesian cement industry look like if the country were to suddenly develop demands and cement consumption patterns like Malaysia does today? Indonesia has a population 8.3 times higher than Malaysia¹ and a cement consumption/capita rate approximately 2.4 times lower.² Assuming current Indonesian cement consumption to be 50Mt, if all of the people in Indonesia were to suddenly start using cement like Malaysia does today, the country's cement industry would have to be nearly 1000Mt/yr to support demand!

While this is clearly not the case today and is unlikely to be fully realised, Indonesia will continue to develop economically. As it does, the world's fourth most populous nation will need more cement. How much is open to debate, but even if a small percentage of that hypothetical 1000Mt can be realised, it will certainly justify the current rush to add extra capacity. This is now especially likely in light of the December 2011 relaxation of land acquisition rules, which will make it easier to build both cement projects and the large construction projects that need cement.

Click here for much more on the cement industries of Indonesia and Malaysia (as well as Vietnam) from the April 2012 issue of Global Cement Magazine.

1. CIA World Factbook website, https://www.cia.gov/library/publications/the-world-factbook.

2. Cement consumption per capita data for Malaysia taken from Lafarge 2010 Annual Report. (http://www.lafarge.com/04112011-customers_activities-cement_market_2010-uk.pdf). Malaysia is a representative comparison for Indonesia based on its GDP to cement consumption ratio.

Indonesia: Indonesia's domestic cement sales were 12.5Mt in the first quarter of 2012, up 18.2% year-on-year compared to the same period in 2011, according to data from cement firm PT Semen Gresik. March 2012 sales were 4.4Mt, a rise of 16.2% year-on-year, the data showed, with most sales on the islands of Sumatra and Java.

"Indonesia's low cement consumption of around 199kg/capita in 2011 continues to provide ample room for growth," said Teguh Hartanto, analyst at Bahana Securities in Jakarta.

PT Indocement Tunggal Perkasa Tbk, Indonesia's biggest cement firm by market value, has estimated that national demand for cement will grow by 8-10% as infrastructure projects increase after a government law in December 2011 speeds up land acquisition. The country's cement sales fluctuate month to month depending on factors such as holidays and the government's end-of-year project completion deadlines.

Indonesia: Indonesia's second-largest cement producer, PT Indocement ,has announced that its recent expansion drive will increase production to up to 30Mt/yr by 2017, up by almost 50% from the 2012 target of 20.6Mt/yr.

One of these projects is the construction of a cement mill in Citeureup, West Java, with an expected production capacity of 1.9Mt/yr. The mill is scheduled for completion in 2013.

Besides the new cement mill, the company is in the final planning stage of constructing a cement factory with a capacity of 4.4Mt/yr at an existing location (brownfield), also in Citeureup. Additionally the company is conducting final studies for the construction of two new cement factories (greenfield) in Central Java and outside Java, each of which will have capacities of up to 2.5Mt/yr.

Finance director Tju Lie Sukanto said the company would fund the expansion projects partly with US$757m of internal cash. He added that this year's market conditions, such as the continuing strong residential-market trends, thanks to an expanding middle class, would further facilitate the company in reaching its growth targets.

Indonesia: PT Indocement, Indonesia's second largest cement producer, has announced that its fourth-quarter 2011 net profit rose 20% as demand for construction jumped in Southeast Asia's biggest economy. The firm's fourth quarter net profit was US$109m in 2011, compared with US$91m in the same period in 2010.

The HeidelbergCement subsidiary reported a full year 2011 net profit of US$392m, up by 12% from US$351m in 2010. Analysts forecast that the full-year 2011 net profit will rise by 11% to US$391m. Indocement's 2010 full-year net revenue rose by 25% to US$1.5bn.

Indonesia: Chinese cement giant Anhui Conch Cement plans to begin construction of a plant in South Kalimantan later in 2012, with an anticipated investment of US$400m.

"The planned plant in South Kalimantan will be able to produce 2.5Mt/yr," announced Industry Minister MS Hidayat as he met with a business delegation from China's Anhui province at the ministry's office. The output will be used for domestic purposes.

Anhui Conch Cement is currently awaiting the completion of its land acquisition process and a license to be issued by the South Kalimantan administration so that the plant can be built in Tanjung, Tabalong. The plant will be equipped with a cement-grinding plant, a seaport, a 60MW power plant and other supporting infrastructure.

Hidayat added that Anhui Conch Cement is also preparing to acquire land in Manokwari, West Papua, in 2013 for another cement plant that would require US$400m. It is expected to meet cement demands in the surrounding areas.

Indonesia: Indonesia's domestic cement sales grew strongly in February 2012, up by 23.9% year-on-year, according to data from the country's largest cement firm PT Semen Gresik. Sales for the month reached 4.1Mt, slightly higher than January 2012's 4.06Mt.

"Low 2011 loan to GDP ratio at around 30% combined with low interest rates should allow credit to continue growing, paving the way for economic growth," said Teguh Hartanto, deputy head of research at Jakarta-based Bahana Securities. The country's cement sales fluctuate from month to month depending on a variety of factors, including religious holidays, which can delay construction, and the government's end-of-year project completion deadlines.

Indonesia: Thailand's Siam Cement Group (SCG) has revealed plans to build a new cement plant in Indonesia to capitalise on the country's rapidly-growing demand for construction materials. Kan Trakulhoon, president and chief executive officer of SCG, said that the company would invest US$300m in a cement plant in Sukabumi, West Java. The plant will have a capacity of 5000t/day and construction is expected to start by the end of 2012.

The investment comes after SCG bought a 100% stake valued at US$135m in Boral Indonesia, a company that produces ready-mixed concrete, from Australia-based Boral in February 2012. Kan said that SCG's growth lies outside of Thailand and that Indonesia is a big part of that.

The SCG chief, who has previously lived and worked in the Indonesian capital Jakarta, said that he had been impressed with Indonesia's improvement during the past few years. "During the last four to five years, the growth was very good. SCG has a lot of confidence in Indonesia," he said. Kan said he that he was not afraid of competition with Indonesia's more established cement makers as SCG had already acquired supporting companies such as Kokoh Inti Arebama, an Indonesian construction-material distributor.

Semen Gresik, Indonesia's largest cement producer, and other cement makers plan to invest a total of US$6.27bn during the next three years to boost production. The investment is expected to produce an additional 30Mt/yr of cement in the country, with annual output reaching 90Mt/yr in 2017 from 52Mt in 2011. Chaovalit Ekabut, SCG's chief financial officer, added that demand for SCG's products remained high in Indonesia.

Looking ahead, Kan said that in the next five years, the company would invest US$5bn in its ASEAN-country operations. In 2012 it will spend US$1.3-1.5bn in various regional investments, but Kan did not disclose how much the company has set aside for Indonesia.

Indonesia: Indonesia's second largest cement producer PT Indocement has announced plans to build a 2 x 30MW power plant in Pati, Central Java. The plant, which will cost around US$200m, will guarantee a power supply to Indocement's new cement factory, which is to be built in Pati later in 2012.

The new cement factory will cost around US$300m, according to Indocement's corporate secretary Sahat Panggabean. It will have a capacity of 2.5Mt/yr and will be operational by mid-2015. This will take Indocement's domestic cement capacity from 18.5Mt/yr up to 21Mt/yr.

Indonesia: PT Semen Gresik has announced plans to build a new 0.6Mt/yr, US$133m integrated cement plant at Manokwari in Papua. Company CEO Dwi Sutjipto said that Semen Gresik wanted to 'dominate' the cement market in Indonesia's eastern regions.

The plant will be commissioned in 2014 after the installation of a new packaging plant in the region, which is expected be commissioned by August 2012. The company has announced ambitious plans to develop a large number of new packing plants in strategic areas along the archipelago with the aim of improving product distribution and consequently cutting logistics costs. "Currently, Semen Gresik has 18 packing plants. We hope to have 16 to 17 more in the next five years to lower distribution costs," said Semen Gresik's finance director Ahyanizzaman, who added that each of the 0.2-0.3Mt/yr plants would require an investment of about US$10m.

Semen Gresik expects to complete the construction of at least four packing plants in 2012, with ongoing packing-plant projects at Sorong in Papua, Banyuwangi in East Java, Banjarmasin in Kalimantan and Balikpapan in Riau. "The packing plant in Banyuwangi is almost finished and the Papua plant is about 50% complete. Meanwhile, we are ready to construct the plants in Kalimantan. We expect to build in more areas in Kalimantan but we remain constrained by land acquisition," added Ahyanizzaman.

New packing plants are part of Semen Gresik's effort to improve its distribution, especially in areas in eastern Indonesia, which frequently face delivery hurdles leading to higher cement prices. Each packing plant will bag cement sent from its closest Semen Gresik factory.The Sorong plant, for example, will process cement produced by Semen Gresik's factories in Sulawesi. The packing plant will have a capacity of bagging 0.6Mt/yr. The company is investing around US$22.2m= in the Papua packing plant, which will be supported by a 10,000t silo and a 150m harbour.

The finance director also said that he expected Semen Gresik to increase its revenue by 10-12% in 2012 due to the new plants and ongoing work on integrated facilities at Tuban and Tonasa. The company forecasts a more moderate increase in its net profit due to its capital expenditure. "We estimate a growth of 1-2% in net profit in 2012 compared to 2011," said Ahyanizzaman. "The slight increase is due to the new factories producing below their full capacity."

Indonesia: PT Indocement Tunggal Prakasa has reported that it will build a US$500m cement factory with a production capacity of 3Mt/yr in the regency of Pati, Central Java.

Sahat Pangabean, Indocement's corporate secretary, said that the company was hoping that the process of licensing the plant would be completed within 2012 and that construction would start immediately afterwards. Sahat added that the company was currently in the process of conducting an analysis of the plant's potential environmental impact.

The project will be run by Indocement's subsidiary PT Sahabat Mulia Sakti and is expected to be operational in 2015.