Infrastructure projects to boost cement demand<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Despite a predicted fall in consumer purchasing power as a result
\nof higher interest rates, cement demand is expected to remain
\nhigh in 2006 with a boost from government and private sector
\nspending on infrastructure projects.<\/p>\n
Infrastructure projects are expected to offset a decline in
\ncement demand from the housing and property sector. Overall
\ndemand could grow by between 7.5 percent and 8.5 percent in 2006,
\nsaid Dwi Soetjipto, president director of cement giant PT Semen
\nGresik.<\/p>\n
\"If translated into volume, demand will be about 35 million
\ntons next year, fairly higher than this year's estimated demand
\nof about 32 million tons, most of which is from the property and
\nretail sector,\" said Dwi.<\/p>\n
Among the government projects being eyed by cement producers
\nnext year are irrigation systems, toll roads and bridges.<\/p>\n
\"We expect the property and retail sector will pick up in the
\nsecond quarter of next year after inflation eases and interest
\nrates are gradually lowered,\" said Widodo Santoso, marketing
\ndirector of PT Semen Padang.<\/p>\n
Widodo said most of the cement demand would continue to come
\nfrom Java, with Banten, West Java and Jakarta alone expected to
\naccount for about 40 percent of total demand in 2006, thanks in
\npart to several toll roads planned for the areas.<\/p>\n
Competition in the cement industry is expected to remain as
\ntough as ever, as market leader PT Indocement Tunggal Prakarsa --
\na local unit of Germany's Heidelberg Cement Group -- tries to
\nmaintain its dominance over Semen Gresik and its unit Semen
\nPadang.<\/p>\n
With its Tiga Roda cement brand, Indocement currently controls
\n40 percent of the market, followed by Semen Gresik with 25
\npercent and PT Semen Cibinong -- controlled by Swiss-based cement
\ngiant Holchim Ltd. -- with 12 percent.<\/p>\n
The remaining 23 percent of the market is held by a number of
\nsmaller cement producers.<\/p>\n
Widodo said that while cement from the household sector was
\nexpected to decline in 2006, it would be risky for producers to
\nlower their prices at a time when production costs were going up
\nand profit margins were relatively slim.<\/p>\n
\"I think cement prices will remain at about Rp 740,000
\n(US$76.20) per ton next year. Expansion into lucrative areas is
\nunlikely to push cement makers to lower prices because that would
\njust damage the industry,\" said Widodo.<\/p>\n
Cement companies engaged in a costly pricing war in 2003 as
\nthey attempted to attract buyers amid falling demand.<\/p>\n
\"There will be less price competition in the industry next
\nyear because most companies have already increased prices this
\nyear to cover rising production costs,\" said the head of research
\nat UBS Securities Indonesia, Joshua Tanja.<\/p>\n
Joshua said Indocement would continue to boast the highest
\nprofit margin next year due in part to its efficient operations.<\/p>\n
Cement demand in Sumatra next year is projected to grow by 4
\npercent, while growth in Java is projected at between 14 percent
\nand 16 percent.<\/p>\n
Demand in Java will be equally driven next year by
\ninfrastructure projects and the household sector, while in
\nSumatra 90 percent of demand will driven by households and 10
\npercent by infrastructure projects.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/infrastructure-projects-to-boost-cement-demand-1447893297",
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"sponsor": "Okusi Associates",
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