Indonesian full-year demand set to beat expectations

Indonesian cement demand is seen closing this year 12 per cent ahead of 2011 figures, above previous expectations of eight per cent, but growth next year is likely to be impeded by capacity constraints, according to analysts at PT Samuel Sekuritas.

Domestic cement consumption reached 44.64Mt in the January to October period of this year, an increase of 14.5 per cent compared to 38.98Mt last year, according to data from the Indonesian Cement Association.

Next year, PT Samuel Sekuritas analyst Adrianus Bias sees sales rising by around 10-12 per cent. “Although the demand will remain strong next year, there will be capacity restraint. Several producers, such as Holcim and Indocement, have already reached utilization levels. Only >Semen Gresik will be at an advantage because it has increased its capacity,” Adrianus said.

The Gresik Group, Indonesia’s leading cement producer, has opened two new plants this year taking its capacity to around 22.5Mt by year-end and almost 26Mt by next year. The company sold 18.13 million tons in the first 10 months of the year, an increase of 13.6 percent compared to 15.96Mt in the same period last year. Its market share for the first 10 months of 2012 has slipped to 40.6 per cent from the 40.9 per cent recorded in the same period last year. In 2013,, the company hopes to achieve a market share of 42-44 per cent, according to Semen Gresik finance director Ahyanizzaman.

Indonesia’s second largest cement producer, PT Indocement Tunggal Prakarsa, part of the HeidelbergCement Group, sold 14.6Mt between Jan-October 2012, up 17.7 per cent YoY and higher than the national increase. The company’s market share rose to 32.2 per cent from 31.3 per cent a year ago. In a recent presentation, Indocement said it has heavily invested in new batching plants and mixer trucks to strengthen its ready-mix concrete production in order to meet the increase in demand for ready-mix concrete for the construction of residential and high rise buildings in Jakarta and West Java. “This [ready mix] has contributed to our increasing market share,” Indocement noted. Residential and high-rise building would continue to expand in 2013, the company added.

Indocement is currently working on adding some 6.3Mta of additional capacity by 2015. Projects include new cement mills with capacity of 1.9Mta under construction in Citeureup. The company is also under final stage to start the construction of a brown-field cement factory with the production capacity of 4.4Mta in the Citeureup area. In addition, the company is under final study to construct two new greenfield cement factories with the production capacity of 2-2.5Mta, one in Central Java and one in outside Java.

PT Holcim Indonesia, meanwhile, is expecting to sell up to 8.64Mt by year-end, up 15.5 per cent YoY, according to corporate communication manager Diah Sasanawati. “Holcim Indonesia has benefitted from the surge in retail sales and increased construction,” Diah said.

According to figures from the cement association, Holcim’s sales volume reached 7Mt during the first 10 months of the year, a 15.7 per cent share of the market. A third cement plant in Tuban, East Java, with a capacity of 1.7Mta is scheduled to begin operations in 2013. Upon completion, this will bring Holcim Indonesia’s total capacity to 10.4Mta.