Cement sales extend declines in May 2015

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Indonesia: Cement consumption fell by nearly 4% year-on-year during the first five months of 2015, the biggest decline in the January - May period in the last six years. The fall has been blamed on the country's slowing economy.

Data released by the Indonesian Cement Association show that cement demand in January - May 2015 fell by 3.8% year-on-year to 22.9Mt. It was the steepest drop so far in 2015. Consumption has declined consistently since February 2015. It was also the biggest drop recorded since 2009, when domestic demand fell by nearly 7% year-on-year due.

Indonesia's economy grew by 4.7% in the first quarter of 2015, the slowest in six years and since the start of the global financial crisis. Cement consumption has been a parameter in emerging markets' economic growth. "Cement demand has not fully recovered yet due to slower economic growth, relatively high interest rates, changes in property regulations and bleak commodity exports, which hampered property demand and consequently reduced cement consumption," said Marwan Halim from the stockbroking arm of United Overseas Bank Ltd, UOB KayHian, in a report. Bank Indonesia has maintained its interest rate at 7.5% to curb inflation and maintain its currency, while mortgage regulation and a lower price threshold for property products subject to 20% income have contributed to constraining the property industry.

Cement consumption in May 2015 fell by 7.9% year-on-year, much steeper than the 1.1% decline recorded in April 2015. It was the biggest May drop recorded since May 2009. Lower sales in May 2015 occurred in almost every part of the country, although East Nusa Tenggara and West Nusa Tenggara Provinces saw monthly sales rise by nearly 50% year-on-year. Commodity-based provinces experienced the highest declines during the month, with South Kalimantan and East Kalimantan making the steepest plunges with 41% and 24%, respectively. Even West Java, which traditionally has one of the highest cement consumption rates in Indonesia, suffered a sales decline of 8.3% year-on-year in May 2015.

Last modified on 17 June 2015

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