Indonesian cement sales fell 0.4 percent (year-on-year) to 4.52 million tons in April 2014. The decline in cement sales was the result of the country’s legislative election that was held on 9 April 2014 as consumers bought few building materials during the campaign period. Head of the Indonesian Cement Association (ASI) Widodo Santoso stated that a number of large infrastructure projects are currently being tendered and are thus unable to boost domestic cement sales yet.
Without the negative influence of the legislative election, cement demand is expected to grow again in May 2014. However, on 9 July Indonesia will hold its presidential election and this might impact again on cement sales.
Whereas cement sales fell in Sumatra, Kalimantan, Sulawesi, Bali and Nusa Tenggara in April, sales grew in the more eastern-located island as well as on Java (Indonesia’s most populous island and the economic and political center of Southeast Asia's largest economy).
According to the ASI, higher electricity prices (caused by the central government’s intention to reduce energy subsidies) per May 2014 increases production costs by three to five percent for cement producers and will require them to optimize efficiency. The country’s cement industry requested for fiscal incentives - in the form of a tax holiday for imports of Japanese machinery and equipment - to compensate for the higher electricity charges. This proposal is currently being studied by the Indonesian Ministry of Industry. This ministry notes that electricity costs account for about 15 to 18 percent of cement producers’ total production costs. The new electricity prices, which are raised by 35 to 64 percent, are expected to add 10 percent to production costs. As such, the ministry’s calculation of new production costs is higher than that of the ASI. The government expects to save IDR 5.6 trillion by raising electricity prices.
Indonesian Cement Sales 2008-2014:
|Year|| Cement Sales
|| YoY Growth
¹ January to April 2014 only
Source: Indonesian Cement Association (ASI)