Displaying items by tag: Semen Grobogan

Heidelberg Materials reversed the prevailing wisdom for western multinational cement companies this week when it said it was preparing to buy a cement plant in Indonesia. It announced on 17 October 2023 that its Indonesia-based subsidiary Indocement had signed a deal to acquire all the shares of Semen Grobogan’s integrated cement plant in Central Java for an undisclosed sum. This challenges the trend since the mid 2010s of the likes of Holcim and CRH selling up in the developing world and concentrating instead in markets in North America and Europe.

The decision to buy a cement plant in Indonesia raises eyebrows because the country can produce far more cement than it needs at present. Its cement capacity utilisation rate has been below 60% since 2020 and Central Java has the most plants out of all the nation’s regions. Indocement’s own investor relations presentation for the first half of 2023 laid out data from the Ministry of Industry and internal sources forecasting that the utilisation rate would only reach 57% in 2025. National production capacity meanwhile is around 117Mt/yr at present and expected to reach just below 120Mt/yr in 2025.

Before this latest agreement, Indocement operated four integrated plants in the country and it was the country’s second largest cement producer after Semen Indonesia. Heidelberg Materials bought the company in 2001 and currently owns a 55% share in it. Three of these plants it owns directly, with a capacity of around 25Mt/yr across 14 production lines. One of these is the 18Mt/yr Citeureup plant, one of the world’s largest cement plants. However, in 2022 the company leased the Maros integrated cement plant in South Sulawesi, the Banyuwangi grinding plant in East Java and several cement terminals owned by Bosowa Group, including terminals in Makassar, Barru and Garongkong, via production facility lease agreements. It said this was part of a plan to reduce logistics costs and target the east of the country better. The integrated plant has been leased for three years from March 2022 and the grinding plant and terminals for five years from September 2022.

Semen Grobogan’s plant started commercial production in 2022, has a cement production capacity of 2.5Mt/yr and limestone reserves of over 50 years. Germany-based Heidelberg Materials was keen to point out that the acquisition would reward it with “significant synergies with Indocement’s existing plants in Indonesia” such as in logistics, alternative fuels, and transfer of technical and sustainability knowledge.

It is worth noting financially that Indocement suffered a couple of bad years during the Covid-19 pandemic with revenue and profit down. However, the situation improved in 2022 with both net revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA) for the year up by 11% year-on-year to US$1.04bn and 4% to US$220m respectively. Despite the company’s sales volumes falling by 2% to 17.6% and energy prices increasing it was able to raise its prices. The first half of 2023 has seen the improvements accelerate with more price rises, higher domestic sales volumes from the new leased operations and increased clinker exports to Bangladesh and Brunei.

The improving financial outlook for Indocement and the new condition of many of its clinker production lines may help to explain what is going on here. The Citeureup plant started up in late 2016 and, combined with the Semen Grobogan plant that started up in 2022, both plants cover three-quarters of the company’s production capacity. In a highly competitive market such as Java this may make a significant difference. Consider also the leased plant at Maros, in the less well-served Sulawesi region, and that focus on terminals elsewhere. Here one might be able to view another approach to coping with overcapacity, by targeting different markets either directly or via exports.

It won’t be clear how well Heidelberg Material’s strategy in Indonesia is working until like-for-like financial figures start to be released. The company itself has warned of various risks such as the country’s impending ban on overloaded trucks and the potential effects of a proposed carbon tax on electricity prices. Another thing to consider are last week’s rumours in the press about Heidelberg Materials selling up in India. If this did happen then the proceeds might well help advance the company’s plans in Indonesia. All of this goes to show that one doesn’t always have to copy one’s corporate peers. The retreat by the western multinationals to safer havens has slowed… for now at least.

Indonesia: Heidelberg Materials subsidiary Indocement has bought the 1.8Mt/yr integrated Grobogan cement plant in Central Java from Semen Grobogan. The plant commands sufficient limestone reserves for the next 50 years and has 700,000t/yr of additional cement grinding capacity.

Heidelberg Materials chair Dominik von Achten said “As part of our ongoing portfolio optimisation, we are making an exciting step in the growth market of Indonesia. Heidelberg Materials has been active in Indonesia for more than 20 years. With this investment, we are now strengthening our presence in one of the most populated regions in Indonesia, where we expect further market growth driven by the growing retail market, developing industrial areas and major infrastructure projects. As frontrunners of decarbonisation in emerging markets, we continue to drive our ambitious CO₂ reduction targets at all our sites in Indonesia, including the new cement plant.”

Indonesia: Semen Grobogan has ordered two MVR 5000 C-4 mills for cement grinding and one MVR 5000 R-4 for raw material grinding from Germany’s Gebr. Pfeiffer. The package also includes an MPS 3350 BK mill for grinding lignite. The mills will be set up at Grobogan cement plant near Semarang in Central Java.

The cement mills, each featuring a drive power of 4000kW, will be capable of grinding 190t/hr of Ordinary Portland Cement at 3600 Blaine or PPC at 4000 Blaine. In addition, the mills will be suitable for grinding blast-furnace cements. The MVR 5000 R-4 with a drive power of 4300kW is guaranteed to achieve a capacity of 500t/hr of raw meal ground to a fineness of 12% R 90µm. The lignite to be processed has a high feed moisture (37%), which is typical for Indonesia. The inherent moisture content in the lignite is 14%. The MPS 3350 BK with a drive power of 800kW will dry the material to a surface moisture content of 1% while at the same time grinding it at 50t/hr to a fineness of 15-25 % R 90µm. The order also includes a spare parts package for two-year operation.

The order was placed by the Chinese general contractor Nanjing Kisen. Commissioning of the mills is scheduled for the first half of 2019.