Govt increases reference prices of cement

Govt increases reference prices of cement

JAKARTA (JP): The government, under pressure from producers,
raised the reference prices of cement across the country by an
average of 40 percent over the weekend in an effort to attract
more investment in the cement industry.

Lily Rosyana, spokeswoman for the Ministry of Trade, said that
the new reference prices, effective from Friday, are expected to
drive investors licensed to build cement plants to materialize
their investment plans soon.

According to official data, the government has issued 23 new
licenses to private companies to construct new cement plants.
Most companies have not accomplished their plans.

According to the Minister of Trade's Decree No.
48/Kp/III/1995, the new price of first quality cement at retail
outlets in Java is set at Rp 8,290 (US$3.76) per 40 kilogram
sack, excluding sales tax, up by 39.79 percent from Rp 5,930, or
Rp 10,360 per 50 kilogram sack.

The new reference prices in Sumatra range between Rp 8,290 and
Rp 10,165 per 40 kilogram sack. The lowest price is found in
Padang, where PT Semen Padang is located, and the highest is in
both Bangka and Belitung, two islands off the South Sumatra
mainland.

In Kalimantan, the government has set the new prices from Rp
9,920 to Rp 10,165 per 40 kilogram sack. In Bali, Nusa Tenggara
and East Timor they range between Rp 8,305 and Rp 9,865.

The government has set the new prices in Ambon and Ternate in
Maluku at Rp 10,130. In Irian Jaya it is between Rp 11,180 and Rp
11,970.

Lily was quoted by Antara as saying that the local reference
prices will be reviewed every January and July.

Investment

Last year, Minister of Industry Tunky Ariwibowo acknowledged
that the old reference prices were not attractive to companies
entering the cement industry because the prices had not changed
since January 1993.

Minister of Trade Satrio B. Joedono vehemently argued that the
government's set prices could not be blamed for the slow-down in
investment growth because they still promised significant profits
to cement companies.

The old cement reference prices had been continuously violated
by almost all cement companies in the last two years. The
companies, through their marketing arms, sold their product above
the government prices.

Last year in Jakarta, for instance, cement prices hit a record
high of over Rp 10,000 per 40 kilogram sack, well above the
government set price of Rp 5,930.

The Indonesian Cement Association has repeatedly suggested
that the government raise the reference prices or even abolish
them.

A number of officials, including Director General of Chemical
Industries Sujata, predicted that the annual cement crises will
continue until 1997, the year the expansion projects of a number
of major cement factories are expected to start production.

Sujata has said that demand is projected at 26 million tons
this year but production will likely reach only 24.5 million
tons.

Minister Tunky said Indonesia would import up to five million
tons of cement and clinker -- a substance used in the production
of cement -- this year to cover the domestic deficit caused by
the wide gap between the supply and demand. (rid)