Cement Sales Growth in Indonesia Limited due to Politics & Commodities

Indonesian cement sales in 2014 reached 59.9 million metric tons, up 3.3 percent from domestic sales in the previous year but below the target that was set by the Indonesian Cement Association (ASI). The ASI targeted a sales growth rate of between 3.5 percent and 4.0 percent year-on-year. This sales target had in fact already been revised down from 6 percent (y/y) due to weak cement sales amid uncertainties brought about by Indonesia’s ‘political year’ (legislative and presidential elections) as well as weak global commodity prices.

Due to the fragmented outcomes of Indonesia’s legislative and presidential elections, several construction and infrastructure projects have been postponed until Southeast Asia’s largest economy could guarantee more political certainty. Due to the close battle between presidential candidates Joko Widodo and Prabowo Subianto (which needed a Constitutional Court case to be determined) political uncertainty lingered longer than initially assumed. The construction and infrastructure sectors account for most of the nation’s cement demand.

However, ASI Chairman Widodo Santoso said that Indonesia remains the top cement consumer among the 10-member Association of Southeast Asian Nations (ASEAN). He added that prospects for the cement industry are positive in 2015 and beyond as the Indonesian government is serious to invest in infrastructure projects, thus boosting cement demand. On Thursday (09/01), it was reported that the government intends to allocate IDR 55 trillion (USD $4.4 billion) for infrastructure development in 13 new industrial zones (through the National Medium-Term Development Plan 2015-2019 (RPJMN 2015-2019). As such, cement sales in Indonesia should grow in the range of 5 to 6 percent (y/y) in 2015.

According to ASI data, cement sales in December rose 1.7 percent (y/y) to 5.4 million tons in December 2014. However, compared to the preceding month cement sales declined by 7.2 percent (m/m) in the last month of 2014. Java, the most populous island of Indonesia, accounted for most cement sales (56 percent of the country’s total cement sales) in 2014.

Market leaders in Indonesia’s cement industry are listed companies Semen Indonesia, Indocement Tunggal Prakarsa, Holcim Indonesia, Semen Baturaja and privately-held Bosowa Corporation.

Indonesian Cement Sales, 2009-2014:

 Year   Cement Sales
   YoY Cement
 Sales Growth
  YoY GDP
  Growth
 2014       60 million        +3.3%    +5.1%¹
 2013       58 million        +5.6%    +5.8%
 2012       55 million       +14.6%    +6.2%
 2011       48 million       +20.0%    +6.5%
 2010       40 million        +4.2%    +6.1%
 2009      38.4 million        +1.1%    +4.6%

¹ forecast
Source: Indonesian Cement Association (ASI)

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