Fears cause rise in cement prices: Tunky

JAKARTA (JP): Distributors are taking advantage of market fears of a possible cement shortage and are raising prices in Java, particularly in the greater Jakarta area, Minister of Industry Tunky Ariwibowo said yesterday.

"Fearing a possible supply shortage, users have been hoarding cement to secure their future needs for constructing houses, highrise buildings and industrial plants," he told reporters.

Cement prices have increased in several parts of Java and Sulawesi to levels far above the government-set local reference prices. Similar price hikes have occurred almost every year, particularly during the dry season when construction activities increase.

"There is no trading speculation related to the cement price increase," Tunky said. "The price hike is also not caused by cut- backs in production by manufacturers."

Director General of Chemical Industries Sujata, after meeting with the Indonesian Cement Association here last week, guaranteed that there would be an adequate supply of cement on the domestic market because manufacturers would increase their output. Manufacturers will also import cement if their output increase still cannot cope with the rising demand.

Over

Tunky said the shortage will soon be over because the supply will soon increase. "In the short term, the shortage can be overcome by increasing production or imports, while in the long term, the problem will be resolved by increasing the country's production capacity," he said.

The country's nine manufacturers have a total production capacity of 20.1 million tons per annum, while the domestic demand is estimated at the same level.

Tunky said yesterday that the capacity will increase as soon as the expansion unit of PT Semen Gresik in Tuban, East Java, starts operation later this year with an annual capacity of 2.3 million tons.

PT Semen Toraja will also build another unit with a capacity of 2.3 million tons a year, he said.

When asked about the possibility of the government lifting the price reference scheme, the minister said that the government will review it.

"We thus far have been using the scheme merely as reference to monitor supply. If prices at market places are above the local price reference, producers should increase supply," he said.

He also dismissed an idea that the business climate is not attractive for investment in cement production, given the fact that there are many businessmen who have been licensed to build new plants.

According to the Ministry of Industry, the government has licensed the establishment of 20 new cement plants with a total capacity of 32.2 million tons a year.

An industry executive said the delay of the plants' construction is merely caused by difficulties of the licensed parties to obtain foreign partners. (yns)