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14 April 2021 (closed)
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The push for government-led infrastructure development across Indonesia, which started from mid-2015, is expected to cause rising cement sales in Indonesia in 2016. The Indonesian Cement Association (ASI) expects to see a 5 percentage point growth in Indonesian cement sales to 64.5 million tons this year (from an estimated 61.5 million tons in 2015). However, ASI Chairman Widodo Santoso emphasized that a delay in government spending could jeopardize achieving the sales projection.
In the first half of 2015 the Indonesian government failed to spend a significant portion of the allocated budgets due to budgetary and organizational reforms, hence leading to disappointment as Indonesian President Joko Widodo seemed to fail to live up to his pledge to boost economic growth by increasing government spending on infrastructure (despite allocating more funds to the infrastructure development budget after curtailing the country's fuel subsidies). However, after a slow start in the first half of 2015 more and more government-led infrastructure projects took off in the second half of the year.
Funds Allocated to Infrastructure Spending in the Government's State Budget:
Moreover, amid the economic slowdown, Bank Indonesia's high interest rate environment and weakening purchasing power the private sector also cancelled or delayed the start of property and infrastructure projects. Since 2011 the economy of Indonesia has been in slowdown-mode. However, GDP growth is expected to touch a bottom (at 4.7 percent y/y) in 2015. This year, the government and various other institutions (including the World Bank and International Monetary Fund) see GDP growth accelerating to 5.3 percent (y/y).
Read Analysis: Overview of Indonesia Gross Domestic Product (GDP)
Santoso said that enhanced execution of government infrastructure development spending was visible in Indonesian cement sales. Cement sales were rising in the months September, October and November 2015 (sales figures in the last two months of 2015 still need to be released).
In the January-October 2015 period, Indonesian cement sales stood at 55.9 million tons, up 2.1 percent from sales in the same period one year earlier (54.8 million tons). Although this is modest growth only, the rising trend that is detected in the second half of 2015 is a positive sign.
Read Analysis: Overview of Indonesia's Cement Industry
Semen Indonesia, the market leader and biggest cement producer of Indonesia, said it expects the company's cement sales in 2016 to grow slightly at 5 percent on the back of the government's push for infrastructure development, accelerating economic growth and political stability.
Indonesian Cement Sales 2008-2015:
|Year|| Cement Sales
|| YoY Growth
¹ ASI forecast
Source: Indonesian Cement Association (ASI)