Indonesia to invest US$6.3bn in new capacity projects

Indonesian cement producers plan to invest IDR57trn (US$6.3bn) to raise domestic production, chairman of the Indonesian Cement Association (ASI) said.

The Investor Daily reports the investment is expected to produce an additional 30Mta of cement and could advance total cement production to 90Mta in 2017. Capacity currently stands at 52Mta.

“With a population of 240 million and cement prices that continue to go up, it makes Indonesia an attractive market for [investors],” said Urip Timuryono, chairman of ASI.

“The government has laid out the plan that will stimulate infrastructure development.” Among other producers, leading manufacturer PT Semen Gresik plans to spend US$2bn to build new cement factories in Java, Sumatra, Kalimantan and Papua island that will combine to produce 10Mt of cement. The Indonesian cement sector has also attracted overseas interest as Anhui Conch of China plans to spend US$2.35bn to build 10Mta of capacity in plants in Kalimantan and West Papua.

President Susilo Bambang Yudhoyono laid out a master plan known as the MP3EI to boost economic growth with the creation of infrastructure including airports, toll roads and seaports. “We also calculate that the government’s ME3EI project will only consume 4-5Mta of cement until 2014.” Urip said, adding that it may signal an oversupply of cement in the country.

He went on to urge the government to expedite its infrastructure projects so that cement production would be absorbed by the industry. “With the assumption of six per cent economic growth, we estimate that in 2017 cement consumption will only reach 68Mta,” Urip said.

Total cement consumption is expected to reach 52Mt this year, up from 48Mt last year. Production is forecast to 60Mt this year from 52Mt in 2011.