Indonesia: cement sales to improve on state-funded projects

Indonesia's cement sales are predicted to improve in the second half of the year since demand is set to increase as the government's infrastructure projects, get under way according to the Industry Ministry.

"Cement sales began to pick up in August and this is expected to continue until the end of the year due to infrastructure maintenance projects that have been started since the middle of this year," the Ministry's director general for agriculture-based and chemistry industries Benny Wahyudi said earlier this week.

" I assume that this year's cement sales can grow better than -4 percent last year's figure; it may even grow by 1 percent."

He said many of government infrastructure projects that were supposedly starting around March had been late and began construction mid-year instead.

" Cement sales can still grow another inch in the second semester," said Benny in an interview.

The ministry's prediction is largely shared by the industry players. The country's second largest cement producer, publicly listed PT Indocement Tunggal Prakarsa, has revised upward national cement sales figures this year from an initial -7 percent to between -5 percent and -4 percent. Although these figures are still negative they are improving.

Indocement finance director Christian Kartawijaya said cement sales slumped steeply in the second half of last year due to the global economic downturn after earlier robust sales, but bounced back at the start of the second half of this year.

" I forecast that the trend for 'domestic' cement sales will be positive between August and December. Hence, the market will total 36 million tons this year, compared to 38 million tons last year."

He said his company had to delay its project to build a 1.5 million ton cement mill in its Cirebon, West Java plant site from June until the year's end, pending anticipated improvements in the market.

"With the new mill in Cirebon our total production capacity will reach 18.6 million tons per year by the end of this year, up from 17.1 million tons currently," said Christian.

According to data from the Indonesian Cement Association (ASI), domestic cement sales fell by 5.5 percent to 21.08 million tons in the first seven months of this year down from 22.3 million tons in the corresponding period last year.

Domestic cement sales were recorded at 3.51 million tons in July alone, up by 2.8 percent from a record in the same month last year. This was the first year-on-year rise in cement sales this year.

Indocement president director Daniel Lavalle previously said the domestic cement market would fully recover next year, with an estimated positive growth of 5 percent, citing the sales trend in the past 10 years which has always been in line with economic and population growth.