Low demand hurting cement production
The Jakarta Post, Jakarta
The country's cement output is expected to grow by a maximum of 3 percent this year, falling short of the initial target primarily due to low domestic demand, according to the Indonesian Cement Producers Association (ASI).
ASI said on Monday the industry only saw a 0.4 percent rise in domestic demand during the first semester, from the same period last year.
"Total national demand in the January-June period reached 12.62 million metric tons, a slight increase from 12.56 million metric tons the year before," ASI said in a statement as quoted by Antara.
The association predicted earlier that the cement output would grow by between 5 to 10 percent this year on the back of rising local demand. Cement output in 2002 grew by 6.8 percent to 27.19 million metric tons.
President of the country's largest cement producer PT Semen Gresik Satrio confirmed the weaker outlook.
He said that while there would be an increase in demand in the second half of the year, the pace would not be fast enough to meet the initial output projection.
"We're expecting a rise (in demand) in the second semester -- in fact, demand in July-August already increased by 11 percent, but toward the year's end, it would only grow an average 2 to 3 percent," he said.
Satrio said that as of June, the company's total sales volume stood at 5.41 million metric tons, a decline from 5.65 million metric tons booked in the same period in 2002, most of which went to the domestic market.
The figure included output from the company's two subsidiaries, PT Semen Padang and PT Semen Tonasa.
Analysts have attributed the low demand to a slow pace of recovery in the property sector, as well as the slow progress of government development projects.
The slower progress in government-funded projects was indicated in the low realization of state budget development expenditures. Of the full-year target of Rp 65.1 trillion, the realization in the first semester stood at Rp 14.1 trillion.
A stronger growth in the cement industry is considered crucial for the economy, not only because the industry employs many workers, but also because it would be seen as a clear sign of an economy moving toward recovery.
As reported earlier, PT Indocement Tunggal Prakarsa and PT Semen Cibinong, respectively the country's second and third largest cement producers, recorded a decline in their first- semester net profits because of the low demand.
Indocement and Semen Cibinong together handle around half of domestic cement sales, while the remainder is dominated by state- owned Semen Gresik.