Displaying items by tag: Indonesia

One news story to note recently has been Cemex’s decision to recommission a kiln in Mexico to address cement shortages in the southwest US. In early February 2021 the Mexico-based producer said it was spending US$15m to restart a 1Mt/yr kiln at its CPN cement plant in Hermosillo, Sonora. The unit is over 250km from the US border but Cemex said it was making the investment to cope with cement shortages and project delays in California, Arizona and Nevada. At present it supplies over 3Mt/yr to California, Arizona, and Nevada from its integrated plant in Victorville, California and via sea-borne imports. Efficiency improvements at Victorville and other unspecified supply chain changes are also planned.

Cemex isn’t the only company with an eye on the south-west US. Around the same time Japan-based Taiheiyo Cement concluded its deal with Semen Indonesia to buy a 15% stake in its subsidiary Solusi Bangun Indonesia (SBI) for around US$220m. It’s a long way from Arizona but the related statement mentioned plans to make SBI’s integrated Tuban plant in East Java more export focused, with the construction of a new jetty and silos. It intends to export 0.5Mt/yr of cement to Taiheiyo Cement’s business in the US. Its local subsidiary, CalPortland, runs two integrated plants in California and one in Arizona.

Chart 1: Annual change in US cement consumption by state, December 2019 – November 2020. Source: PCA & USGS.

In its recent winter forecasts the Portland Cement Association (PCA) reported that the Mountain region of the US recorded the highest growth in cement consumption in 2020, at 10%, due to underlying economic fundamentals and favourable demographic trends. Data from the United States Geological Survey (USGS) supports Cemex’s view too. Ordinary Portland Cement and blended cement shipments rose by 21% year-on-year to 2.74Mt in Arizona and New Mexico in the first 11 months of 2020 from 2.28Mt in the same period in 2019. This doesn’t quite tally in California where shipments fell slightly, by 0.8%, to 9.42Mt. However, it reported 12% growth to 2.38Mt in the first quarter of 2020, suggesting that the market could return sharply once the coronavirus epidemic is better under control. Overall, shipments in the US grew by 1.03% to 82.3Mt in the first 11 months of 2020, driven by growth in central regions. The PCA expects national cement consumption to grow by about 1% in 2021 with a ‘robust’ recovery driven by residential housing but slowed by uncertain coronavirus vaccination supplies and general market volatility.

In a world with too much clinker production capacity, it stands out to see two established producers so visibly chasing market share in a mature market. Rather than building new plants, both Cemex and Taiheiyo Cement are using or reviving existing production lines in other countries, and building import strategies as well as optimising their existing facilities in the regions. With the western building material multinationals now often looking to focus on ‘safe’ markets in Europe or North America the fight to grow market share in these regions is likely to become more intense. It also complicates decisions about when or if an existing plant should be mothballed or shut. After all, Cemex’s old production line in Hermosillo is about to become very useful indeed.

Germany: HeidelbergCement has completed a review of its business and identified five assets to sell. Reuters has reported that the company plans to sell the first of the five assets in early - mid-2021. Chairman Dominik von Achten said that the group would not exit ‘rock-solid’ markets like Northern Europe. He added that Indonesia, where it holds a 51% stake in Indocement, is an ‘important market.’

Von Achten said that the group has made a strong start to 2021, though ‘visibility on future prospects’ remains low. Its focus is on raising the productivity of underperforming assets or selling them. He added that a margin improvement plan in its underperforming North American region is on track.

Japan/Indonesia: Taiheiyo Cement says that its board has approved and concluded its deal with Semen Indonesia to buy a 15% stake in its subsidiary Solusi Bangun Indonesia (SBI) for around US$220m. As part of the agreement, SBI’s Tuban plant will increase its export capacity by building a new jetty and silos. It will then export 0.5Mt/yr of cement to Taiheiyo Cement’s subsidiary in the US. The Japanese cement producer said that is focusing on markets in South-East Asia as part of its sustainable business development strategy in response to projected long term declining cement demand in Japan.

Indonesia: Subhan has been appointed as the managing director of Semen Gresik. This follows his management of Semen Tonasa, another subsidiary of Semen Indonesia, from 2017 to 2020, according to the Antara news agency. Previously, he was the finance director of Semen Tonasa and head of its accounting department. He originally started working for the cement producer in 1998. Prior to this he worked for Humpus Group. Subhan holds degrees in accounting and management from the Hasanuddin University in Makassar.

Indonesia: Semen Indonesia subsidiary Semen Padang’s cement and clinker exports totalled 1.6Mt in 2020. Indonesia Government News has reported that the company said that it exported 0.2Mt of cement and 1.4Mt of clinker throughout the year. The main markets for its products were Bangladesh, China, Malaysia, Myanmar, the Philippines, Australia, the Maldives and Sri Lanka.

Semen Indonesia group senior export sales manager Fifit Abriyanto said, “There are two types of cement that we export, namely ordinary Portland cement (OPC) Type I grade 52.5N and OPC Type I grade 42.5N."

Indonesia/Japan: Taiheiyo Cement and Semen Indonesia have finalised a collaboration agreement with the aim of building a comprehensive partnership, including consultations on promotion and sale of cement and clinker. Taiheiyo Cement said, “The business alliance is for business collaboration and research and development of cement, resources, environment, building materials and more.”

In accordance with the agreement Taiheiyo Cement will buy shares in Semen Indonesia’s subsidiary Solusi Bangun Indonesia, formerly Holcim Indonesia. The deal is expected to be completed in early 2021. In April 2020 Taiheiyo Cement agreed to buy a 15% stake in Solusi Bangun Indonesia for between US$186m and US$232m.

Indonesia: Semen Indonesia has signed a memorandum of understanding with rail freight company Kereta Api Indonesia (KAI). Indonesia Government News has reported that the memorandum covers a planned increase in cooperation on rail-based transportation and medium and long-term land leases, the conduct of joint studies into railways and infrastructure and the development of other forms of potential cooperation.

President director Hendi Prio Santoso said, “This cooperation is a synergy to complement each other and provide the best results for both parties. Through the synergy that exists today, it is hoped that it can be more optimal in taking advantage of every opportunity, so that it can further contribute to the company, Badan Usaha Milik Negara (BUMN) and the Indonesian nation.” He added, “Today is the first step in a joint commitment. Hopefully, this cooperation can run smoothly and in accordance with our goals, expectations and planned target time.”

Indonesia: The La Tofi School of Corporate Social Responsibility (CSR) has named Semen Indonesia as the winner in three categories at the Nusantara CSR Awards 2020. Indonesia Government News has reported that the three categories are: Health and Economic Assistance for Emergency Management of Covid-19, Leaders Inspiring CSR Practices and Community Involvement in Handling Waste.

General manager of CSR Edy Saraya said that the Covid-19 outbreak requires “integrated countermeasures, including the involvement of all components of society.” He added, “Through the programme implemented, we hope to help prevent and control the spread of Covid-19 and to be able to accelerate the implementation of (health protocol) adaptation of new habits. Especially for those affected by the pandemic, it can improve the economy of the community and the environment around the operational area."

Australia/Indonesia: Semen Indonesia subsidiary Semen Padang says that it has dispatched a 25,000t batch of cement for Australia. Bisnis News Sumatra has reported that company is targeting total shipments of 1.58Mt to the country in 2020.

Senior manager of export sales Fifit Abriyanto said, “We are building connections with new customers. We already exported 35,000t of clinker to Bangladesh in September 2020.”

There’s no single theme this week, just a few news stories of note that may have wider significance.

Firstly comes the news that Semen Indonesia subsidiary Semen Padang has been exporting 25,000t of cement to Australia. This follows a consignment of 35,000t of clinker to Bangladesh. The company is hoping to hit a cement and clinker export target of 1.58Mt in 2020 in spite of the on-going coronavirus pandemic. It reached 1.09Mt (about 70%) of this by mid-September 2020 through exports to Bangladesh, Myanmar, Philippines, Australia, Sri Lanka and Maldives.

The wider picture here is that local sales in Indonesia fell by 7.7% year-on-year to 27.2Mt in the first half of 2020 from 29.4Mt in the same period in 2019, according to data from the Indonesian Cement Association (ASI). Cement and clinker exports are up by 32.8% to 3.7Mt from 2.8Mt. Semen Indonesia’s revenue is down but it has managed to hold its earnings up so far. During press rounds in late August 2020 its marketing and supply chain director, Adi Munandir, told local press that he expected domestic demand to fall by up to 15% in 2020 due to effects of coronavirus on private construction and government infrastructure plans. Analysts reckon that the worst of the demand slump hit in the second quarter of 2020 when government-related coronavirus restrictions were implemented, so Semen Indonesia’s third quarter results will closely scrutinised.

One of Semen Padang export targets is the Maldives. This chimes with another story this week because Oman-based Raysut Cement has just bought a majority stake in a cement terminal from Lafarge Maldives for US$8m. The 9000t capacity Thilafusi cement terminal is located on the island of Thilafusi, Kaafu and was expanded in 2015. Raysut Cement has tended to stick to markets in the southern Arabian Peninsula and the east coast of Africa, with projects planned in Madagascar and Somaliland. Yet expansion plans in places further away such as India and Georgia have also been mentioned publicly. A greater presence in the Maldives is a solid step towards Raysut heading eastwards. This would also mirror the plans of the country’s gypsum sector to dominate African and Asian markets and a general longer term shift in global markets from west to east.

One place west that has been doing well in cement though is Brazil. National Cement Industry Union (SNIC) data for September 2020 show a 21% year-on-year boom in cement sales to 5.8Mt and a 9.4% year-on-year increase to 44.6Mt for the first nine months of 2020. Earlier in the year the country’s limited coronavirus suppression methods were attributed for letting the recovering cement sector grow. Now, SNIC has directly thanked government support for civil construction. However, Paulo Camillo Penna, the president of SNIC said. “The results are surprising so far, but that doesn't give us security in the long run,” due to a bubble of real estate and commercial activity that already appears to be declining. Given the slump in cement demand from 2015 to 2018 it’s understandable that SNIC is taking the recovery cautiously.

And to finish we have two connected stories about Cemex. Following the release of its resilience strategy in September 2020, the company has now declared that its integrated Rüdersdorf cement plant in Germany will be the centrepiece of its CO2 reduction plans as part of ‘Vision Rüdersdorf.’ Details are light at present but we expect some kind of carbon capture and storage or usage project. An addendum to this – or perhaps it’s the other way round (!) – is that Cemex has also just announced further credit amendments but with sustainability-linked metrics. Cemex’s chief financial officer (CFO) Maher Al-Haffar said, “We are especially proud that this transaction represents one of the largest sustainability-linked loans in the world.” The teeth of this arrangement remain to be seen but the integration of finance and sustainability has serious implications generally.

Watch out for a research and development themed interview with Cemex and Synhelion in the December 2020 issue of Global Cement Magazine