August Cement Sales Grow Positive, Except Banten

The good results of August cement sales contributed to the accumulation of eight months this year. Cement sales in Indonesia from January to August 2016 grew by 3.9 percent to 39.07 million tons from 37.6 million tons in the same period last year.

However, in some areas, cumulative sales of cumulative up to August still recorded negative, among others Jakarta (-9.9%), Banten (-9.7%), West Java (-0.2%), Kalimantan (-11, 8%). The cement market in Java contributing 56 percent to the total national cement market only recorded a slight growth of 1.3 percent in the eight months to August 2016.

Investment Moratorium

The government’s plan to impose a moratorium on cement investment permits has begun to strengthen. The government through the Ministry of Industry (Kemenperin) is conducting a study and evaluation of the plan.

Minister of Industry (Menperin) Airlangga Hartarto explained, it will propose changes Negative Investment List (DNI) for cement investment. “We will discuss it later,” Airlangga said.

Currently, the government does not restrict stock ownership or investment in the cement industry. It is stated in Presidential Regulation No. 44/2006 on the list of closed and open business fields with requirements in the field of investment.

However, the overcapacity (oversupply) and oversupply conditions that occur in the cement industry make the competition in this industry tighter and potentially undermine the performance of each producer.

According to data from the Ministry of Industry (Kemenperin), currently the national cement industry capacity is 92 million tons. In fact, the national requirement was recorded only 62 million tons per year or 67.39% of the total cement production. Thus there is overcapacity and oversupply about 32.6% of total installed capacity.

Previously, has made a research related to oversupply in the national cement industry by the end of 2015. The oversupply experienced by the national cement industry is estimated to reach 24% of the total national capacity, according to calculations. The estimates come from data from Indonesian Cement Association (ASI) which predicts total consumption in Indonesia in 2015 as much as 60.6 million tons, while total capacity is 79.8 million tons. Thus, an estimated supply surplus of cement is around 24% or equivalent to 19.2 million tonnes in 2015. The estimate is much higher than the projection made in June 2015, with an estimated oversupply of about 19%.

In addition to Minister of Industry, Head of BKPM Thomas Lembong also appealed to cement industry do not increase temporary investment in Indonesia. Central Java Governor Ganjar Pranowo also proposed to the central government to carry out a moratorium on investment permit for cement.

Achmad Sigit Dwiwahjono, Director General of Chemical, Textile and Multifarious Industries at the Ministry of Industry, explained the main consideration of limiting the investment permit for cement so that the supply is not excessive. “We are trying to find a market balance. In our calculations, the demand for cement is balanced within the next five years, “he said.

Therefore, Tamba Hutapea, Deputy of Investment Planning at the Investment Coordinating Board (BKPM), said that BKPM is now awaiting the evaluation of cement industry investment from the Ministry of Industry concerning the proposal to include cement investment in negative list of investment, meaning it applies to foreign and local investment.

According to Achmad, the plan to limit cement plant investment will apply in Java Island. He mentioned, at present, the national cement production is concentrated in Java, which is equal to 56%. While Sumatra is 22%, Sulawesi 8%, Kalimantan 7%, and Bali and Nusa Tenggara 7%. (* / Various sources / editorial team 05)