Cement Sales in Indonesia Continue to Disappoint in February 2017
Cement sales in Indonesia rose 0.2 percent year-on-year (y/y) to 4.54 million tons in February 2017 from 4.54 million tons in the same month one year earlier. This growth pace is considerably below market participants' targets. Weak cement sales in the second month of 2017 are blamed on weather conditions (the high amount of rainfall that caused floods in several parts of Indonesia) and on the fact that direct investment (in infrastructure and property) outside Java remains bleak.
Widodo Santoso, Chairman of the Indonesia Cement Association (ASI), said Indonesia's cement sales remained stagnant so far in 2017 with growth only being recorded in Java, Bali and Nusa Tenggara. Meanwhile, the islands of Sumatra, Kalimantan, Sulawesi and parts of eastern Indonesia saw big declines (more than 8 percent) in terms of cement sales.
So far this year (the January-February 2017 period), Indonesia's overall cement sales fell 1.1 percent (y/y) to 9.72 million tons compared to sales in the same period one year earlier. Meanwhile, several Indonesian cement producers are concerned that sales remain weak in the remainder of the year, while the nation's cement oversupply (caused by the influx of new cement producers and expansion programs of existing cement producers) gives rise to fierce competition, hence limiting the profitability of cement manufacturers. In 2016 a total of IDR 15 trillion (approx. USD $1.1 billion) was invested by local and foreign cement producers in production facilities in Indonesia.
In 2016 total installed annual cement production capacity of Indonesia reached 92.7 million tons, while only 62 million tons of cement were sold domestically that year. This year total annual installed production capacity is expected to reach beyond 100 million tons, while cement sales are only targeted to grow 4 - 5 percent (y/y) in 2017, implying rising overcapacity.
Indonesian Cement Sales in February 2017 per Island/Region:
| Island/Region | Cement Sales |
YoY Growth |
| Java | 2,510,000 | +4.9% |
| Kalimantan | 296,000 | -8.2% |
| Sumatra | 976,000 | -5.7% |
| Sulawesi | 369,000 | -12.7% |
| Bali & Nusa Tenggara | 270,000 | +18% |
| Maluku & Papua | 120,000 | -5.9% |
Source: Indonesian Cement Association (ASI)
Therefore, cement manufacturers in Indonesia hope that the central government will soon boost infrastructure development across the nation by transferring the infrastructure funds (allocated in the 2017 State Budget) to the regional authorities. Moreover, they would like to see developments with the government's "One Million Houses" program.
Read more: Overview & analysis of Indonesia's Cement Industry
Indonesian Industry Minister Airlangga Hartarto stated that Indonesia's average per capita cement consumption is currently still very low at 243 kilogram, far below conditions in neighboring countries Malaysia (751 kilogram per capita), Thailand (443 kilogram per capita), and Vietnam (661 kilogram per capita). This would imply there is still a lot of room for growth in terms of cement consumption in Indonesia over the next couple of decades. However, for the moment conditions in Indonesia's cement sector are rough due to the oversupply. Therefore Hartarto proposes to curtail cement imports and will encourage the diversification of local cement products. He also emphasized local players need to become more innovative in order to become more efficient.
Indonesian Cement Sales 2008-2016:
| Year | Cement Sales |
YoY Growth |
| 2016 | 62 million | +1.6% |
| 2015 | 61 million | +1.8% |
| 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 | - |
Source: Indonesian Cement Association (ASI)