Fitch lowers Indonesia cement consumption expectations

Indonesian cement producers are on track to achieve the lower-end of the Indonesian Cement Association's (ASI) 4-5 per cent annual growth target, with Fitch Ratings expecting a boost in demand during 2H16 due to new construction projects and more favourable economic conditions.

Domestic cement demand rose 4.3 per cent YoY in 1Q16 to 14.4Mt, according to ASI's latest cement consumption data. This followed a modest increase of only 0.9 per cent YoY in 2015.

However, Fitch said the quarterly number hides the slower demand growth in February of 3.4 per cent YoY and March of 2.1 per cent, following strong 7.2 per cent demand growth in January.

Fitch says the recent slowdown can be attributed to weak property pre-sales and heavy rains, which have affected property-related projects.

Fitch says it will take time for property pre-sales to fully recover and lead to increased construction activity, despite lower interest rates and recent relaxation in some property-related regulations.

Consumption in 1H16 may also be negatively affected by April's unfavourable weather and the upcoming Eid Islamic fasting month that falls in June-July, when cement demand tends to be weaker.