Cement demand to grow by over 10% per year<\/p>\n
JAKARTA (JP): Cement demand in Indonesia is expected to grow
\nby more than 10 percent per annum up to the end of the decade,
\nreflecting the country's strong economic growth and the booming
\nconstruction sector, according to investment bank Lehman
\nBrothers.<\/p>\n
"Based on our Asian Economics team forecast that real GDP for
\nIndonesia will grow at an average of seven percent over the next
\nfive years, we estimate domestic demand for cement to grow by 15
\npercent in 1995 and by an average of 10.5 percent a year in 1996-
\n2000," the bank said.<\/p>\n
In a report made available to The Jakarta Post yesterday,
\nLehman Brothers predicts that the demand will exceed supply,
\ngiven that most domestic cement plants already operating at full
\ncapacity.<\/p>\n
This year alone, the supply shortage is estimated at 1.2
\nmillion tons and next year it is expected to reach 2.9 million
\ntons.<\/p>\n
The supply shortage has prompted all nine cement producers of
\nthe country to prepare aggressive expansion plans to capture the
\ngrowing demand.<\/p>\n
Indocement, currently the largest cement producer, says it
\nwill increase its capacity by six million tons per year.<\/p>\n
Semen Gresik, the second-largest producer, plans to increase
\nits capacity to 4.6 million tons per year from its two plants in
\nTuban, East Java. Including its recently-acquired plants -- Semen
\nPadang, in Sumatra, and Semen Tonasa, in Sulawesi -- Gresik is
\nset to overtake Indocement to become the largest producer in
\n1997.<\/p>\n
Semen Cibinong, Indonesia's third-largest cement producer,
\nplans to increase capacity to 5.2 million tons per year.<\/p>\n
Indocement, Semen Gresik and Semen Cibinong, which are listed
\non the Jakarta Stock Exchange, account for 74 percent of the
\nIndonesia's total cement production. Their production facilities
\nare in Java, which is the largest consumer of cement of the
\ncountry -- accounting for approximately 69 percent of the three
\ncompanies' total production.<\/p>\n
All of Indonesia's cement producers are likely to benefit from
\nfurther increases in cement prices resulting from the continuing
\nsupply shortfall.<\/p>\n
Of the three listed cement companies, Lehman Brothers believes
\nthat Indocement offers the best value for investors. It rated the
\ncompany a "1-buy".<\/p>\n
Cement consumption in Indonesia mirrors the level of economic
\nactivity. Domestic cement consumption has risen from 11.4 million
\ntons per year in 1989 to 21.5 million tons in 1994.<\/p>\n
This was due to a flurry of activity in the housing
\nconstruction sector which was partly encouraged by the
\ngovernment's relaxation of a tight credit policy in the latter
\nhalf of 1992. Only in 1991, when interest rates peaked at above
\n25 percent, that cement demand slumped.<\/p>\n
In spite of the increasing demand, however, on a per-capita
\nbasis Indonesia remains one of the lowest cement consumers in
\nSoutheast Asia. According to the ASEAN Cement Federation, in 1994
\nIndonesia consumed about 113 kilograms of cement per capita,
\ncompared with Singapore's 1,156 kg, Malaysia's 512 kg, Thailand's
\n493 kg and the Philippines' 140 kg.<\/p>\n
According to Lehman Brothers, this indicates that there is
\ngreat potential for cement consumption growth in Indonesia,
\nparticularly as the country moves into the next stage of
\nindustrialization.<\/p>\n
"Given a strong estimated economic growth of seven percent,
\nand its commitment to fulfilling its vast housing needs and
\ninfrastructure development plans, we are projecting per capita
\ncement consumption to increase to 264 kg by the end of the
\ndecade," said the report. (13)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/cement-demand-to-grow-by-over-10-per-year-1447893297",
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