Cement Industry Expected to Pick up This Year

January 6, 2016, thejakartapost.com

The country’s cement consumption is expected to recover from last year’s sluggishness, driven by the government’s increased infrastructure spending.

State-owned cement producer PT Semen Indonesia, the nation’s largest cement producer, expects total cement consumption to grow more than 5 percent this year, after a stagnant 1 percent growth last year from 59.9 million tons in 2014.

“Consumption has picked up since August, after the slowing down earlier in the year, because infrastructure development commenced, with toll roads and dam projects,” Semen Indonesia corporate secretary Agung Wiharto said.

The infrastructure projects began last year that he referred to included the construction of 40 kilometers of toll roads across Indonesia as well as 13 dams including Raknamo Dam in East Nusa Tenggara.

Agung added that the commencement of infrastructure projects last year would continue to boost cement consumption this year as many projects would take years to finish.

“There are also other factors that support our expectations, such as the [improving] economic growth and a consumption per capita that remains low,” he said.

National cement consumption grew by 4.7 percent year-on-year (yoy) in November last year to 6.1 million tons, bringing total cement consumption from January to November to 54.9 million tons, a 0.8 percent increase from the corresponding period last year, according to Indonesian Cement Association (ASI) data.

Cement consumption is one of the key indicators of domestic consumption, which drives more than half of Southeast Asia’s largest economy.

The data spurred optimism in the industry that suffered flat growth or even contraction throughout last year, having headed into its first plunge since 2009, as Indonesia’s economy grows at its slowest pace in nearly six years.

Agung also applauded the Public Works and Public Housing Ministry’s move to conduct early bidding on project tenders to speed up spending and infrastructure development. “These projects will also boost cement consumption,” he said.

The ministry started bidding as early as August, to speed up spending that only started around June last year so that by Jan. 6 percent to 10 percent of its budget would be disbursed.

However, a research note by Mimi Halimin from PT Daewoo Securities Indonesia stated that the November’s cement consumption data confirmed that the cement sector was yet to recover from last year.

“We predict December’s cement consumption will be lower than November’s cement consumption due to the holiday season as well as the rainy season,” it said. – See more at: http://www.thejakartapost.com/news/2016/01/06/cement-industry-expected-pick-year.html#sthash.lNlGXnm7.dpuf

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