Additional cement imports no guarantee of price drop

Additional cement imports no guarantee of price drop

JAKARTA (JP): A seven-hour hearing with leaders of the
Indonesian Cement Association yesterday left House members
puzzled about the reasons behind the astronomical rise in cement
prices over the last few weeks.

The industry's leaders explained that supplies from domestic
cement plants during the first nine months had been increased by
more than 21 percent to 15.7 million tons from the same period
last year.

Earlier on Monday, Industry Minister Tunky Ariwibowo
attributed the steep price rise to a 20 percent increase in
demand.

The House members in fact seemed taken aback by the
industrialists' assertion that the government-set price
references are merely guidelines and by no means ceiling prices.

"The retail prices depend on market forces," said Soepardjo,
the new chairman of the association, who replaced Anang Fuad
Rivai after the latter suddenly resigned on Monday in a
controversial move,

Instead, the industrialists expressed doubts that the planned
import of 800,000 tons of cement during the next three months
would be able to bring the price down to the government-set local
price references.

Vice Chairman of the Indonesian Cement Association Hasyim
Djojohadikusumo said yesterday that cement imports from India and
Thailand could be sold here at Rp 8,300 per 40-kilogram bag at
the lowest and those from China at Rp 7,500.

These prices would still be much higher than the government-
set price reference of Rp 5,930 for Java.

"My estimates for the imported cement prices are the lowest
ones. So they could still be higher on the retail market," Hasyim
told a hearing with the House Commission in charge of
Manufacturing, Mines and Energy.

Over the last few weeks, cement prices in Jakarta rose to as
high as Rp 15,000 per sack, in Bali to Rp 11,000, or 57 percent
higher than the local price reference of Rp 6,975, and in
Jayapura, Irian Jaya, at Rp 48,000, or six times higher than the
local price reference of Rp 7,965.

Soepardjo conceded though that the additional imports would
eventually push down the current prices but not to the
government-set price references.

Meanwhile Sudwikatmono, chairman of the country's largest
cement factory PT Indocement Tunggal Prakasa, said his factory's
sales price to its main distributors was Rp 5,500. The
distributors then sold at Rp 6,700 to dealers who in turn resold
at Rp 7,100 to retailers.

Distortion

In a related development, noted economist Anwar Nasution
criticized the government policies in cement production and
trading as not only ineffective but also as distorting the
market.

Speaking at a seminar on the Indonesian cement industry, Anwar
said that "bad policies" have turned the cement market in the
country into a seller's market, controlled by a single dominant
producer.

"The market distorting policies combined with the greed of
producers and distributors have pushed up the cement prices to
their highest levels ever," he said.

Anwar said that the government had unintentionally allowed
cement producers and their contributors to collude in
manipulating prices.

He also criticized the government's plan to import 800,000
tons of cement over the next three months.

"It is just nonsense," he said. "Who will import it and what
for? It's already late," he said, adding that the rainy season,
which could begin this month, will slash demand. (rid/hen)