PT Semen Indonesia (SMGR ) and Indocement Tunggal Prakarsa (INTP) expect domestic cement volume to grow 3-4 per cent YoY in 2021. This could be achieved through a recovery in bulk cement, which declined in 2020 by 22 per cent YoY. Volume is expected to remain soft in the 1Q21 in Indonesia with turnaround expected to occur in the 2Q21, added UBS Global Research (Indonesia). 

In 2020 there was increased competition in Java and Kalimantan, but the average selling price for Tier-1 brands remained stable as pricing competition mostly occurred in Tier-2 brands (through higher promotion). SMGR and INTP expect pricing to remain flat in 2021, according to UBS Global Research (Indonesia). 

Meanwhile, SMGR believes the recent joint partnership agreement with Taiheiyo, in December 2020, would strengthen its export market and products offering.

Competition
The recent entrance of Semen Singa Merah (SSM – Hongshi Cement) in the 4Q20 has only seen relatively small sales from SSM and the company is focussed on selling bulk cement that has yet to build brand power, according to SMGR. INTP stated that SSM is now trying to enter the bulk cement market in Central Java by offering lower prices.

SMGR has prepared its Semen Padang brand and new masonry product for the East Java market, while INTP is still monitoring the situation on whether to introduce its Semen Rajawali brand (INTP's Tier-2 product) to the region.

Meanwhile, there has been prolonged delay in the operations of Semen Grobogan plant (2Mta, located in Central Java) thus there is still some concern on its impact. However, Semen Merah Putih which raised its market share to 4.4 per cent in 2020 (2019: three per cent). In particular, Semen Merah Putih grew its presence outside Java after acquiring a new grinding mill in Sumatra and more optimal Bayah plant operation (7Mta) post commissioning of its second production line in 1H20.  

Environmental initiatives
Faced with rising coal prices, SMGR and INTP have used lower calorific value coal, which is less impacted, but have refrained from signing long-term supply contracts. For 2021 both companies plan to increase alternative fuel usage (2020 – INTP: nine per cent from total fuel, SMGR: four per cent), which would also help reduce carbon emission.

Both companies have made efforts in reducing the clinker ratio, SMGR by increasing sales of non-OPC products while INTP by introducing hydraulic cement.