Domestic cement demand down in 2005<\/p>\n
Urip Hudiono, The Jakarta Post\/Jakarta<\/p>\n
Inflationary pressures from higher energy prices and a weakening
\nrupiah, in addition to a delay in major infrastructure projects,
\nmay result in this year's growth in domestic cement demand being
\nfar below last year's 8 percent, a major cement maker estimates.<\/p>\n
PT Indocement Tunggal Prakarsa said higher energy prices would
\nlikely force the company to raise its prices to cope with
\nincreasing production costs.<\/p>\n
Indocement finance director Christian Kartawijaya told
\nreporters on Thursday that the country's cement industry and
\nconstruction activities would likely experience a slowdown due to
\nthe weakening rupiah -- now standing at some Rp 9,800 a dollar
\ncompared to last year's close of Rp 9,290 -- and high interest
\nrates.<\/p>\n
\"Some 65 percent of our production costs are directly or
\nindirectly related to the dollar,\" he said.<\/p>\n
Christian said the recent fuel price hikes would further hurt
\nthe industry, as the multiplier effects would eventually affect
\ntheir production costs.<\/p>\n
\"The planned rolling out of major infrastructure projects for
\nthis year has also been delayed,\" he said.<\/p>\n
Global coal prices rose by 33 percent earlier this year while
\nindustrial diesel has more than doubled since March. Marine fuel
\noil had also increased by 34 percent.<\/p>\n
State power firm PT Perusahaan Listrik Negara (PLN) also
\nannounced that it would raise its electricity charges during peak
\nhours for industrial undertakings with power utilization capacities
\nof more than 14 kilovolt-amperes (kVA) starting this month.<\/p>\n
\"In light of this situation, we see the growth in cement
\ndemand here being well below last year's 8 percent,\" he said. \"In
\naddition, our performance in the remainder of the year will
\nlikely not be as good as during the first quarter.\"<\/p>\n
The country's second largest cement producer, which is
\nmajority-owned by German cement giant HeidelbergCement, sold 5.84
\nmillion tons in the first half of this year, as compared to 5.69
\nmillion tons in the same period last year, booking a net profit
\nof Rp 307.6 billion (US$31.4 million).<\/p>\n
Indocement president director Daniel Lavalle said the recent
\nrise in energy prices would have a major impact on the price of
\ncement.<\/p>\n
Although Indocement had no problem with the government's
\ndecision to reduce fuel subsidies through price adjustments
\nconsidering that other countries actually imposed energy taxes,
\nLavalle however hoped for a more planned and focused policy.<\/p>\n
\"The main problem here is that the recent increase in fuel
\nprices came as something of a surprise to the industry, making us
\nunprepared and hurting our businesses,\" he said.<\/p>\n
\"With this, there is no other option for us than to increase
\nprices,\" he said, though stressing that Indocement would continue
\nto seek ways to make its production more efficient.<\/p>\n
Indocement had previously said it would increase prices by
\nsome 15 percent this year.<\/p>\n
The firm's technical director, Kuky Permana, said that among
\nits cost-cutting strategies was converting its coal-fired
\ngenerators to natural gas. \"Natural gas could work out at some 40
\npercent cheaper than coal,\" he said.<\/p>\n
Indocement owns three plants located in Citeureup and Cirebon,
\nboth in West Java, and Tarjun, South Kalimantan, that produce
\nsome 80 percent of its own electricity needs from coal and
\ndiesel.<\/p>",
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