The start of infrastructure projects in Indonesia - ranging from roads, bridges, power plants, smelters, and public housing - has managed to boost cement consumption in the first month of 2016. Widodo Santoso, Chairman of the Indonesian Cement Association (ASI), said domestic cement consumption in Indonesia rose 4.4 percent (y/y) to 5.14 million tons in January 2016 from the same month one year earlier. Highest growth in consumption occurred in Sumatra (+15.8 percent y/y to 1.1 million tons), Java (+5.3 percent y/y to 2.9 million tons) and Sulawesi (+19 percent y/y to 424,000 tons).
Santoso hopes to see further rising cement sales in February on the back of the government's one million houses program and infrastructure development in the villages (for which the government allocated IDR 47 trillion in the 2016 State Budget). Earlier this week, Indonesian Finance Minister Bambang Brodjonegoro said the government's spending on infrastructure projects in the first month of the year had increased 15 times to IDR 1.5 trillion (approx. USD $112 million) compared to January 2015.
Santoso added that Indonesia will see around 16.5 million tons of cement being added to the country's total cement production capacity in 2016. With cement demand this year expected at 65 million tons, it thus means that production capacity - by far - exceeds domestic cement demand. As such, Santoso hopes that Indonesian cement producers can increasingly focus on the export of cement to countries such as Bangladesh, Africa, Australia, the Philippines, Timor Leste, Sri Lanka and the Middle East.
Enny Sri Hartati, Director of the Institute for Development of Economics (INDEF), said the current cement over-capacity in Indonesia is actually the result of a delay in infrastructure development. A few years ago Indonesia still had to cope with a cement deficit. Domestic cement producers then started to invest trillions of rupiah to boost cement production in line with government-led infrastructure development plans. An example of an ambitious government-led project that has not achieved its initial target is the one million houses program (which involves public housing for the lower income segments). Last year only 400,000 houses were completed. Although this program has supported domestic cement consumption in Indonesia, it should have done better according to INDEF.
Indonesian Cement Sales 2008-2016:
|Year|| Cement Sales
|| YoY Growth
¹ ASI forecast
Source: Indonesian Cement Association (ASI)