Indonesia Cement Industry growing in par with 6.5% GDP growth

Indonesia’s GDP grew by 6.5% in fiscal year 2011, its best performance in the last 15 years. This growth was driven by strong domestic consumption and investment. The Indonesian cement industry also witnessed a growth in capacity, consumption as well as production of cement: total revenues of the cement industry touched IDR 44 trillion in the year recording a y/y (year-on-year) growth of more than 17%. The industry accounted for 0.6% of the GDP in 2011.

The country was the second largest consumer amongst the Southeast Asian countries with total cement consumption reaching 48 million tons by years end.  However, per-capita consumption was only 195kg, which was quite low compared to global and even regional standards. The annual cement production touched 52 million tons in FY11 while designed capacity grew to 57 million tons. Around 98% of cement produced in Indonesia was consumed by the domestic market itself during the year and the rest was exported.

Annual cement consumption recorded a growth of 17.7% in year 2011 backed by strong demand from the housing and construction sectors. To cash in on this rising demand, leading cement companies have charted out aggressive expansion plans. Semen Gresik has planned to invest IDR 6.96 trillion to develop cement plants in Java and Sumatra while Indocement has planned to invest IDR 1 trillion to develop two cement plants in Java. The third biggest producer, Holcim Indonesia has also planned to invest USD 200 million to develop a cement plant in Tuban, East Java. As a result of these expansions, the total designed capacity in the country is expected to touch 64 million tons by the end of year 2013.

The first four months of FY12 also reflected a similar trend with growth in both consumption and production of cement. However, cement consumption was disproportional to cement production in this period, highlighting the huge demand for cement in the country. Cement consumption touched 16.8 million tons in the January-April period while production lagged behind at 15.6 million tons.

In FY11, Semen Gresik, Indocement and Holcim Indonesia together, accounted for 85% of the annual cement sales in the country. The other 15% came from Semen Andalas, Semen Baturaja and Semen Bosowa Marus. Semen Gresik continued to lead the industry by recording operating revenues of around IDR 16 trillion, a y/y growth of 12.7%.  Holcim Indonesia recorded the highest EBIDTA growth of 28.4% y/y among the three players. Meanwhile, Indocement recorded a 24.7 y/y% growth in its total revenues which reached a figure of IDR 13.9 trillion.

The outlook for the Indonesian cement industry is positive. Backed by strong domestic demand and government support for housing and infrastructure development, the annual cement consumption is expected to cross 55 million tons by end of 2012 itself. The major challenges facing it are raising prices of fuel, coal, and transportation costs. The industry will also have to meet global pollution and emission standards which will take another considerable amount of investment.

Salient Points

• Indonesia’s cement industry recorded a 17.7% growth in domestic consumption in FY11. It also recorded consumption of 16.8 million tons in the first four months FY12 growing by 16.6% y/y. The annual consumption is expected to cross 55 million tons by the end of FY12. 
• Total production of cement in Indonesia was around 52 million tons in FY11. In the first four months of fiscal year 2012, production of cement touched a figure of 15.6 million tons. The gap between consumption and production of cement during this period was 1.2 million ton.
• By the end of fy11, the total designed capacity for cement production in Indonesia was around 57 million tons. Semen Gresik was the leader in terms of designed capacity in FY11 with a share of around 35% of the total capacity. It was followed by Indocement and Holcim with a share of 33% and 14% respectively. 
• In year 2011, the total export of cement from Indonesia was around 1.2 million tons. In the period 2007-11, cement exports declined at a CAGR of 37%. Around 98% of all cement produced in Indonesia was consumed by the domestic market itself in year 2011.

Chart: Total Cement Consumption in Indonesia-FY12 (In Million Tons)

Source: CEIC Data

These are only a few of the findings in the new Indonesia Cement Industry report. Learn more and purchase now>>