Cement Sales in Indonesia Accelerate on Kick Off Infrastructure Projects
According to the latest data from the Indonesian Cement Association (ASI), Indonesia's cement sales climbed 10.7 percent year-on-year (y/y) to 6.4 million tons in October 2015 as government-related infrastructure development has picked up in the second half of the year (cement sales only contracted on the island of Kalimantan in October). Cement sales are an interesting indicator as they provide valuable information about the country's household consumption and investment in property and infrastructure sectors.
Government capital spending, at last, accelerated sharply in the third quarter of 2015, rising to USD $3.76 billion, double what was spent in the first quarter (when public spending was disturbed by the late approval of the revised 2015 State Budget as well as government reorganizations). However, in a recent article news agency Reuters notes that "after nine months more than 70 percent of the capital budget remains unspent."
Meanwhile, the World Bank stated in its latest Economic Quarterly, titled "In Times of Global Volatility", that Indonesia's public capital spending is estimated to have climbed 21.4 percent (y/y) in real terms in the first nine months of 2015 compared to the same period in 2014, providing support to economic growth.
Widodo Santoso, Chairman of the ASI, said various infrastructure projects - such as regional government projects as well as smelter and power plant construction - have started hence boosting cement sales. An example is the recent kick off of the Trans-Sumatra highway, a 2,600-km toll road comprising 24 sections across the island of Sumatra.. This project is estimated to require IDR 331.69 trillion (USD $24 billion) worth of investment and should be finished by 2019. As a result cement sales on Sumatra rose 17 percent in October.
Over the past two months, sales of cement in bulk outperformed sales of cement in bags, indicating that cement is being purchased for big projects.
Accelerating cements sales are expected to continue in the last quarter of the year. According to Jovent Giovanny, analyst at CIMB Securities, Indonesia's Public Works & Housing Ministry will purchase three million tons of cement in Q4-2015. Santoso expects to see total cement sales at 63 million tons in full-year 2015, up 5 percent from 60 million tons in the preceding year. Due to expansion of domestic cement producers in recent years, the country's total cement production capacity now stands at 78 million tons.
Indonesian Cement Sales 2008-2015:
| Year | Cement Sales |
YoY Growth |
| 2015¹ | 63 million | +5.0% |
| 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)