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)