Cement Demand Indonesia Continued to Fall in January-July 2015
In the first seven months of 2015 Indonesian cement sales continued to fall, signalling decreased property and infrastructure development in Southeast Asia’s largest economy. Domestic cement sales fell 4.1 percent to 31.3 metric tons in the January-July 2015 period from the same period last year. Apart from the slowing economy (which slowed to a six-year low in the second quarter of 2015), weakening cement sales in July were also caused by Idul Fitri celebrations when business traditionally comes to a near standstill.
Widodo Santoso, Chairman of the Indonesian Cement Association (ASI) remains optimistic about future cement sales this year as government-led infrastructure projects are slowly taking off. As such, he expects cement sales and consumption to rise in the second half of the year, particularly after more government budget allocations are spent on infrastructure development. Santoso targets a 5 percent sales growth in each month up to the year-end.
Based on data from ASI, the regions of Bali & Nusa Tenggara and Kalimantan experienced steep declines in cement consumption by 26.5 percent and 23.6 percent, respectively, in July 2015. In the country’s largest cement markets, Java and Sumatra, cement consumption fell 13.9 percent and 3.3 percent, respectively.
Santoso added that Indonesia’s cement production capacity has expanded by an additional 11 million metric tons) after four new cement factories commenced operations (established by Semen Bosowa, Holcim Indonesia, Semen Merah Putih, and the Siam Cement Group). Obviously, this additional cement supply in combination with weakening cement demand causes a larger oversupply as well as higher competition.
Semen Indonesia, the largest cement producer in Indonesia, revised its growth target for domestic cement sales to 0 percent (year-on-year) in 2015 (from an initial target of +5 percent) 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 percent (y/y). The company expects domestic cement demand to improve starting from the third quarter in 2015 as government-led infrastructure development should lead to higher cement demand.
Indonesian Cement Sales 2008-2015:
| Year | Cement Sales |
YoY Growth |
| 2015¹ | 62 million | +3.3% |
| 2014 | 60 million | +3.3% |
| 2013 | 58 million | +5.6% |
| 2012 | 55 million | +14.6% |
| 2011 | 48 million | +20.0% |
| 2010 | 40 million | +4.2% |
| 2009 | 38.4 million | +1.1% |
| 2008 | 38 million | - |
¹ ASI forecast
Source: Indonesian Cement Association (ASI)
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