Cement consumption to reach record high this year

Adianto P. Simamora, The Jakarta Post, Jakarta

Although the economy is still struggling to recover from the devastating impact of the 1997 economic crisis, domestic cement consumption is expected to jump to an all-time high of 29 million tons this year, according to the Indonesian Cement Association (ASI).

This estimate exceeds even the precrisis domestic consumption level of 27 million tons.

The association, however, did not say what was behind this expected robust demand. But industry experts said that new housing projects and renovations would drive demand this year.

Tim Clough, president of publicly listed PT Semen Cibinong, told The Jakarta Post that new housing projects would boost domestic cement consumption this year to precrisis levels.

Ahmad Solichin, a cement sector analyst at securities firm Vickers Ballas, said that although the overall construction sector had been in the doldrums, cement consumption had been on the rise since 2000, thanks to housing construction.

"Demand for cement will hit the precrisis level this year with some 78 percent to be used mainly for the construction of new residential houses and renovations," Ahmad said.

According to property consultant Panangian Simanungkalit, some 110,000 new houses will be built this year.

Data from the ASI shows that in the first six months of this year, domestic cement consumption reached 12.6 million tons.

To meet the higher demand this year, the country's cement firms will have to boost their average capacity to 72 percent from 65 percent last year. In 1998, the average capacity was only 50 percent.

Domestic demand for cement plummeted at the start of the regional economic crisis, which hit Indonesia in mid-1997. Demand dropped by 31 percent to 19 million tons in 1998 from 27 million tons in 1997.

The property sector, which had been fueling demand for cement before 1997, was badly affected by the crisis, forcing many developers out of business.

Elsewhere, ASI said cement exports this year would reach eight million tons, lower than last year's 9.5 million tons.

Indonesia exported some 4.5 million tons of cement and clinker in 1998 following the plunge in domestic demand, while production reached some 22 million tons.

The country's cement producers are Semen Gresik, Indocement Tunggal Perkasa, Semen Padang, Semen Baturaja, Semen Cibinong, Semen Tonasa, Semen Bosowa Maros and Semen Kupang.