Rembang Cement Plant Semen Indonesia

After the revocation of the environmental permit there emerged concern that the Rembang cement plant cannot be completed. Semen Indonesia, the largest cement manufacturer in Indonesia, has been building this plant since 2011. The Rembang plant, which requires an investment worth IDR 4.6 trillion (approx. USD $354 million), would boost the company's production capacity by an additional 3 million tons of cement, annually. Initially the plant would be fully operational in 2017. However, earlier this year Semen Indonesia President Director M. Suparni said the plant is expected to be fully operational before the end of 2016. However, without environmental permit operations cannot start.

Earlier this year Rembang residents challenged the cement plant project in Indonesian courts, arguing that the Rembang plant and limestone mining activities will destroy the area's natural karst caves as well as water reservoir. In the initial trial at the Rembang District Court and appeals at the High Court and the Supreme Court these residents lost their case. However, in the judicial review the Supreme Court sided with the Rembang residents.

In August 2016 Indonesian President Joko "Jokowi" Widodo instructed an environmental study (strategic environment assessment) to be conducted on the project. Contrary to other controversial projects, such as the Batang power plant, the government has not gone all the way to defend the Rembang cement project (even though it involves a state-controlled company). This is most likely due to the low priority of the cement plant. Contrary to the lack of sufficient energy supply, Indonesia's cement production exceeds local demand.

Indonesian Cement Sales September 2016:

Region Cement Sales
Java    3.11 million   -5.0%
Sumatra    1.22 million   -3.2%
Kalimantan    0.39 million   -4.0%
Bali & Nusa Tenggara    0.31 million   -3.0%
Sulawesi    0.49 million   +6.8%
Maluku & Papua    0.13 million  +10.0%
Indonesia    5.64 million   -3.3%

Source: Indonesian Cement Association (ASI)

Indonesian Cement Sales in September

Widodo Santoso. Chairman of the Indonesian Cement Association (ASI), informed that cement sales dropped heavily in September 2016, especially on the islands of Java, Sumatra and Kalimantan (while cement consumption in Papua, Sulawesi and Maluku rose).

Read more: Overview of Indonesia's Cement Sector

However, total cement sales in Indonesia so far this year are still in the green zone. In the January-September 2016 period a total of 44.71 million tons of cement were sold domestically in Indonesia, up 2.95 percent from the same period one year earlier. But this is not the growth pace that had been hoped for earlier. Considering several new cement plants have opened (or will open later this year), hence adding production capacity, while demand has grown sluggishly (despite the government's commitment to push for infrastructure development and for the low-income housing program), it causes a rising oversupply.

Indonesian Cement Sales 2008-2016:

Year Cement Sales
2016¹     63 million  +3.3%
2015     61 million  +1.8%
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)