Indonesia's cement export performance is much more impressive. In the first 11 months of 2016 Indonesia exported 1.5 million tons of cement, up a whopping 52.2 percent year-on-year (y/y).

It is interesting to note that in November 2016 two of Indonesia's big cement manufacturers - Semen Indonesia and Holcim Indonesia - saw their market share fall more than 6 percent, while Semen Merah Putih and Semen Baturaja gained market share.

Indonesia's installed cement production capacity has grown sharply in recent years due to the influx of new players and expansion programs conducted by existing cement producers. In 2016 the nation's total annual cement production capacity is estimated to touch nearly 100 million tons and is expected to rise to 104 million tons by 2018.

However, the combination of rising production capacity and sluggishly growing cement sales implies that the utilization rate has fallen. In 2016 it is estimated that only 65 percent of the nation's total annual installed cement production capacity was used, down significantly from a utilization rate of 76.9 percent in the preceding year. In 2017 this utilization rate is expected to fall slightly before rising in 2018 on the back of a recovering property sector and the continuation of infrastructure development.

Rising production capacity and sluggishly growing cement demand also implies that the cement price will remain under pressure in the foreseeable future, limiting corporate earnings of the country's cement producers (and therefore a renewed focus on exports is a good strategy). Meanwhile, the higher price of coal and electricity will give rise to higher production costs for Indonesian cement producers. Energy-related costs are estimated to account for about 38 percent of total production costs in the cement sector. In this context the smaller cement producers will face more difficulties to maintain market share and therefore the traditional big cement players in Indonesia should be able to win market share in 2017.

Overall, however, we regard Indonesia's cement sector in 2017 as "underweight" and it will require a significant boost in cement demand stemming from infrastructure development and - most importantly - a rebounding property market before we can become positive about Indonesia's cement sector.

Indonesia's Domestic Cement Sales:

Year Cement Sales
2018¹     69 million
2017¹     64 million
2016¹     62 million
2015     61 million
2014     60 million
2013     58 million
2012     55 million
2011     48 million
2010     40 million
2009    38.4 million
2008     38 million

¹ forecast
Source: Indonesian Cement Association (ASI)

Indonesian Cement Exports:

Year Cement Export
2018¹    2.01 million
2017¹    1.83 million
2016¹    1.52 million
2015    1.02 million

¹ forecast
Source: BCA Sekuritas

Expectations for 2017:

Company Net Profit
(IDR bln)
Semen Indonesia    4,126           3.8 12.9   111 14.1
Indocement Tunggal Prakarsa    4,265           4.7 13.9   141 15.4
Semen Baturaja     336          34.2 76.7   481 10.1
Cement Sector Average       -           9.8 25.2   195 13.9

Source: BCA Sekuritas