Indonesia cement price rise on the cards

Indonesian cement producer, PT Semen Gresik is considering increase cement prices along with other local producers to offset planned fuel and electricity costs. 

The government’s plan to raise the subsidized fuel price to IDR6000/litre as of April from the current IDR4500, coupled with a possible increase in electricity tariffs by 10 per cent, have been widely expected to boost prices across the board, increasing  production and distribution costs.

State-owned Semen Gresik’s President Director Dwi Soetjipto has said that it is still undecided about raising prices and is evaluating other options. "The production cost will no doubt increase if fuel oil price is raised on April 1. But cement price also largely depends on the market mechanism. If the market competition remains tight we will choose not to raise our price," he said in an interview with Asia Pulse.

The fuel oil price hike will affect transportation and distribution costs the most as they make up 40 per cent of the company`s overall fuel oil consumption, Soetjipto said.

Gresik is currently preparing two scenarios; to improve synergy with its two subsidiaries, Semen Padang and Tonasa, or to increase the use of low-calorie coal. "Since early this year we have no longer used high-calorie coal. We only use low-and medium-calorie coal with a ratio of 40 per cent to 60 per cent. We hope the use of low-calorie coal will reach 100 per cent," Soetjipto added. "Hopefully, the two scenarios will enable us to use energy as efficiently as possible and the cement price will remain unchanged."

Meawnwhile, Agung Wiharto, Gresik’s head of investor relations, told the Jakarta Post that should the company proceed with a price hike it would be to “to offset our growing costs.” He also noted that higher prices will also result in the delays of consumers' plans to build houses, add more rooms and renovate.
Against that backdrop, nationwide sales growth in cement may slow from 17.7 per cent last year to about eight per cent this year, according to Agung.

PT Indocement Tunggal Prakarsa also plans to pass on to the market incremental operational costs, finance director Tju Lie Sukanto has said.

Meanwhile, Indonesian Cement Association (ASI) chairman Urip Timuryono, commented: "The [cement] price increase may vary depending on the location of the plants and distribution points, because the burden is on transportation costs," said Indonesian Cement Association (ASI) chairman Urip Timuryono.

"Some cement makers with lagging market shares might not raise prices to grab larger shares amid competition," Urip also noted.