First Quarter, Cement Sales in East Java Grow Highest

Thus, the cement market in East Java became the new prima donna during the first quarter of 2017 which recorded the largest sales in the province in Indonesia, beyond West Java and Central Java.

Nevertheless, total cement sales in Indonesia during the first quarter of 2017 only grew by 0.9% to 14.75 million tons from 14.62 million tons previously. This is influenced by market weakening in Sumatra (3.2%), Kalimantan (9.9%), and Sulawesi (7.2%).

On the other hand, the competition of the cement industry in Indonesia is hot and critical. Just imagine, the oversupply of cement in Indonesia in early March 2017 is estimated to reach 50%, exceeding the initial projection of the Ministry of Industry which estimates the oversupply level of only 38% in 2018.

According to data obtained by team, the current cement production capacity has exceeded 93 million tons, while demand until the end of 2016 is only 62 million tons. That means, half of the total national cement capacity is potentially idle or not absorbed by the domestic market, if not exported.

“The competition is getting fiercer. Oversupply this happens because we are late investment in the period (last government). Well fitting now investment, the economy slows down and new players emerging, “said a source of the cement industry.

In comparison, the Ministry of Industry estimates that the surplus of cement supply in Indonesia only reaches 38 percent in 2018, up from 37 percent in 2016. According to the Director General of Chemical, Textile and Multifarious Industries of the Ministry of Industry, Achmad Sigit Dwiwahjono, the excess supply of cement occurred due to production capacity growth exceeded domestic needs.

“Competition of cement industry will be tighter, considering the capacity of cement production in Indonesia in 2018 is estimated to reach 106.3 million tons, or more than 38% of the national demand of 66.2 million tons,” said Achmad Sigit.

The condition of oversupply will have a wide impact on factory utilization, marketing strategy, product mix strategy (ready mix and concrete products), efficiency, pricing strategy, and lead to consolidation issues. Evidently, the trend of price decline has reached double digits, especially in areas with high demand and high level of competition, according to monitoring (* / Editorial team 03)