Update COVID-19 in Indonesia: 115,056 confirmed infections, 5,388 deaths (4 August 2020)
5 August 2020 (closed)
USD/IDR (14,647) +60.00 +0.41%
EUR/IDR (17,355) +42.63 +0.25%
Jakarta Composite Index (5,127.05) +52.02 +1.03%
Between the years 2011 and 2013 Indonesia’s cement industry seemed to be a goldmine. Double-digit growth in annual domestic cement sales – supported by strong growth in the country’s property sector, particularly on the islands of Java and Sumatra – attracted new foreign investment in cement production facilities, while established cement producers in the Archipelago invested in expansion of their cement production facilities.
Once these foreign and domestic investments had materialized (in the 2014-2017 period), it resulted in very strong growth of Indonesia’s national cement production capacity. But, problematically, growth in domestic demand for cement suddenly dropped heavily as the property sector cooled significantly. Yes, domestic cement sales continued to grow after 2013, but the annual growth pace slowed from double-digits to very low single digits. The result was a rapidly rising excess of the cement supply (or glut) that put great pressure on cement prices.
And considering cement exports from Indonesia are still very limited, albeit growing, the cement plants of cement producers across Indonesia cannot operate at full capacity, hence the national capacity utilization rate has declined drastically in the 2014-2017 period (see the table below). Cement exports could be a solution to offset the negative impact of very modestly growing cement demand at home. However, it is difficult for Indonesian cement players to compete with their stronger (more competitive) counterparts in China, Thailand and Vietnam on the global market.
This article discusses:
• Indonesia's rapidly rising installed national cement production capacity; why have many investors invested in (the expansion of) cement production facilities over the past decade?
• Trends in domestic cement consumption; why did cement demand in Indonesia rise rapidly up to 2013, and why did consumption slow sharply in the years beyond 2013?
• Zooming in on Indonesia's two biggest cement producers: Semen Indonesia and Indocement Tunggal Prakarsa.
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