Indonesia: cement demand declines Jan-Jul 2015

Slowing property and infrastructure development in southeast Asia’s largest economy caused a drop in cement sales from January to July 2015. Domestic cement sales fell 4.1 per cent to 31.3Mt from the same period last year, according to Indonesia Investments.

Apart from the stuttering economy (which slowed to a six-year low in the second quarter of 2015), the month of July also saw the Idul Fitri celebrations when business traditionally comes to a near-standstill. In the country’s largest cement markets, Java and Sumatra, cement consumption fell 13.9 and 3.3 per cent, respectively.

Meanwhile,  based on data from the Indonesian cement association, ASI, the regions of Bali-Nusa Tenggara and Kalimantan experienced steep declines in cement consumption by 26.5 and 23.6 per cent, respectively, in July 2015.

Widodo Santoso, chairman of ASI, remains optimistic as government-led infrastructure projects are slowly taking off. He expects cement sales and consumption to rise in the second half of the year and targets a five per cent sales growth in each month up to the year-end.

Mr Santoso added that Indonesia’s cement production capacity has expanded by an additional 11Mta after four new cement factories commenced operations established by Semen Bosowa, Holcim Indonesia, Semen Merah Putih and the Siam Cement Group.

Semen Indonesia, the largest cement producer in Indonesia, revised its growth target for domestic cement sales to zero per cent YoY in 2015 (from an initial target of five per cent) due to weak cement demand amid the slowing economy, sharp rupiah depreciation, weakening commodity prices and tighter competition. Sales of Semen Indonesia in the first half of 2015 decreased by 4.2 per cent YoY. The company expects domestic cement demand to improve starting from the third quarter in 2015 as government-led infrastructure development is expected to lead to higher cement demand.