Widodo Santoso, Chairman of the Indonesian Cement Association (ASI) remains optimistic about future cement sales this year as government-led infrastructure projects are slowly taking off. As such, he expects cement sales and consumption to rise in the second half of the year, particularly after more government budget allocations are spent on infrastructure development. Santoso targets a 5 percent sales growth in each month up to the year-end.

Based on data from ASI, the regions of Bali & Nusa Tenggara and Kalimantan experienced steep declines in cement consumption by 26.5 percent and 23.6 percent, respectively, in July 2015. In the country’s largest cement markets, Java and Sumatra, cement consumption fell 13.9 percent and 3.3 percent, respectively.

Santoso added that Indonesia’s cement production capacity has expanded by an additional 11 million metric tons) after four new cement factories commenced operations (established by Semen Bosowa, Holcim Indonesia, Semen Merah Putih, and the Siam Cement Group). Obviously, this additional cement supply in combination with weakening cement demand causes a larger oversupply as well as higher competition.

Semen Indonesia, the largest cement producer in Indonesia, revised its growth target for domestic cement sales to 0 percent (year-on-year) in 2015 (from an initial target of +5 percent) due to weak cement demand amid the slowing economy, sharp rupiah depreciation, weakening commodity prices, and tighter competition. Sales of Semen Indonesia in the first half of 2015 decreased by 4.2 percent (y/y). The company expects domestic cement demand to improve starting from the third quarter in 2015 as government-led infrastructure development should lead to higher cement demand.

Indonesian Cement Sales 2008-2015:

 Year    Cement Sales
   YoY Growth
 2015¹        62 million         +3.3%
 2014        60 million         +3.3%
 2013        58 million         +5.6%
 2012        55 million        +14.6%
 2011        48 million        +20.0%
 2010        40 million         +4.2%
 2009       38.4 million         +1.1%
 2008        38 million             -

¹ ASI forecast
Source: Indonesian Cement Association (ASI)

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