Update COVID-19 in Indonesia: 365,240 confirmed infections, 12,617 deaths (19 October 2020)
19 October 2020 (closed)
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While domestic cement demand remains bleak, Indonesia's cement producers managed to raise their level of production capacity utilization due to a surge in exports. However, export growth will only slightly improve the structural oversupply situation in Indonesia's cement market. With installed annual production capacity estimated at 103.8 million tons of cement, nearly 40 million tons of capacity remains unused.
In the first half of 2017 Indonesia's cement demand declined 1.3 percent year-on-year (y/y) to 28.99 million tons. This bleak result was primarily caused by weak demand in June. Cement demand plunged by a whopping 26.8 percent (y/y) to 3.73 million tons in the month June 2017. However, these data are slightly distorted as the Ramadan month and Idul Fitri celebrations - a period when economic activity including construction drops drastically - fell earlier this year. Therefore, there should occur a rebound in cement demand in July.
Agung Wiharto, Corporate Secretary of Semen Indonesia, said the company currently uses 85-90 percent of its total installed cement production capacity. About 5-10 percent of the company's total cement production is exported abroad.
With domestic demand bleak, while cement supplies are more than plenty across the country (putting downward pressure on cement prices), Semen Indonesia is eager to boost cement exports in order to improve its corporate earnings. And although coming from a low base Semen Indonesia has been successful so far. While Semen Indonesia, the largest cement manufacturer in Indonesia, sold 12.8 million tons of cement in H1-2017 (up 3.5 percent from cement sales in the same period one year earlier), its exports surged 344.2 percent (y/y) to 839,858 tons.
So far this year shares of Semen Indonesia, a government-controlled company, have surged nearly 14 percent to IDR 10,425 a piece.
Meanwhile, rival Indocement Tunggal Prakarsa has been eager to boost efficiency. With its new cement plant in Citeureup (West Java) it can cut production costs by USD $5 per ton. This plant has a capacity to produce up to 4.4 million tons of cement in one year. Several older - and inefficient - cement plants of the company have been closed.
Overall, Indocement Tunggal Prakarsa's capacity utilization rate is around 70-75 percent, significantly lower than the rate of Semen Indonesia, possibly because Indocement is not too focused on exports. Christian Kartawijaya, President Director of Indocement, said the company does export cement to Bangladesh and Sri Lanka. However, export volumes are very limited as the company's main focus is on clinkers for the domestic market.
In the January-June 2017 period Indocement's cement sales fell 1.4 percent (y/y) to 7.8 million tons. So far this year its shares have risen 17.53 percent to IDR 18,100 a piece.
Stock Performance Indonesia's Listed Cement Manufacturers:*
SMGR = Semen Indonesia
INTP = Indocement Tunggal Prakarsa
SMCB = Holcim Indonesia
SMBR = Semen Baturaja
* normalized stocks, 1 January 2017 = 100