Indonesia: incumbents suffer as new entrants fight for market share

Cement prices in Indonesia are falling as newer firms attempt to win market share from the established players, state-owned Semen Indonesia, HeidelbergCement’s Indocement Tunggal Prakarsa and Holcim Indonesia.

A report from Indonesia Investments notes that the entry of five new firms into the Indonesian market has led to production capacity rising above 100Mta, while demand is set to reach just 63Mt in 2016.

This has led to heavy downward pressure on prices: a report by Trimegah Securities finds that the smaller players are offering cement at five to 10 per cent below the prices charged by the big three in Jakarta, Indonesia's capital and major market. 

The new firms are considerably smaller in terms of installed capacity than the established players. Anhui Conch has a 1.55Mta plant in South Kalimantan, Pan Asia has a 2Mta plant in the central region, Siam Cement has a 1.9Mta plant in West Java, Cemindo Gemilang has a further West Java plant with a capacity of 4Mta and Jui Shin Indonesia's West Java plant has a 2Mta capacity. Together these account for 11.45Mta, less than any one of the big three.

Falling prices appear to be having the desired effect. Semen Indonesia’s market share fell 5.8 per cent YoY to 40.7 per cent in February 2016, while Indocement Tunggal Prakarsa’s was cut to 26.8 per cent. However, Holcim Indonesia has bucked the trend, growing its market share slightly to 14.2 per cent.