Also in the first month of 2018 cement demand on Sumatra, the country's second-biggest cement consumer (after Java), had been strong amid the construction of toll roads, dams and power stations. Meanwhile, stronger commodity prices boost people's purchasing power in the commodity-rich areas on Sumatra and Kalimantan, hence part of the local population starts to renovate their houses or build a new house.

Thus, a strong 16.4 percent (y/y) increase in cement demand was also detected on Kalimantan in the second month of 2018. This growth was attributed to the development of the Samarinda-Balikpapan toll road as well as strategic power plant and port projects. Meanwhile, cement sales growth in Kalimantan in February 2018 is also attributed to the low base effect as demand was weak last year amid low coal prices.

Cumulatively, cement sales in Indonesia reached 10.48 million tons in the first two months of 2018, up 7.7 percent (y/y). This is a promising growth rate for the cement industry of Indonesia which has been plagued by weak growth in recent years, while companies' corporate earnings have been affected by the oversupply situation. While total combined production capacity of the country's cement manufacturers has reached beyond 100 million tons per year, actual cement demand may only reach around 70 million tons in full-year 2018.

Stakeholders in Indonesia's cement industry remain optimistic, however, that cement demand will rise at a faster pace on the back of the government-led infrastructure push, the government's One Million Houses program, and a rising number of local (small-scale) infrastructure and property projects financed through the village funds budget across the country (village funds originate from the central state budget). But considering the rainy season will have ended in April, the month of March will not show strong growth yet.

Indonesian cement sales in February fell 15.7 percent on a month-on-month (m/m) basis. This was due to rainfall, the Chinese New Year celebrations and the fact that February has fewer (working) days than January.

Cement Sales Breakdown Indonesia:

Region January
Java 3,180,000 2,630,000
Sumatra 1,210,000 1,050,000
Sulawesi  478,000  381,000
Kalimantan  355,000  345,000
Bali & Nusa Tenggara  288,000  252,000
Moluccas & Papua  167,000  131,000
Total 5,680,000 4,790,000

Source: Indonesian Cement Association (ASI)