More cement imported to curb prices

JAKARTA (JP): Minister of Industry Tunky Ariwibowo announced yesterday that Indonesia will import some 800,000 tons of cement over the next three months to cover shortages at home and to curb the steep price rise.

"Increasing the supply is the only way to curb the soaring prices," the minister said, dismissing allegations of political motives or market manipulation behind the severe cement shortage, which has hit Jakarta and other major cities over the past three weeks.

Tunky said that Indonesia had initially planned to import around 400,000 tons of cement and clinker from October to December in addition to the 600,000 tons of imports already delivered, but the persistently severe shortages in recent weeks prompted the government to double cement imports to 800,000 tons over the next three months.

"This measure will bring total imports to around 1.4 million tons for the whole year, up significantly from the initial projection of one million tons," the minister said after meeting with President Soeharto.

He said that Indonesia imported around 600,000 tons in the January-September period.

Cement prices in Jakarta and other major cities have soared by over 35 percent to around Rp 10,000 (US$4.59) per 40 kilogram bag from the government-set reference price of Rp 7,200 early last month due to the shortage of supply.

Tunky said the steep price rise was caused mainly by the severe shortage due to the almost 20 percent increase in domestic demand, much higher than the 12 percent rise estimated by the government.

The latest wave of price increases, the second since July, has been widely suspected as having been engineered by cement producers and distributors, who colluded to raise prices.

Coordinating Minister for Political Affairs and Security Soesilo Soedarman even went as far as alleging a political motive behind the acute cement shortage, blaming it on remnants of the banned Indonesian Communist Party (PKI).

Head of the Armed Forces information center Brig. Gen. Syarwan Hamid said Saturday that the military would take stern actions against speculators, who piled up cement stocks to raise prices.

He said that a special military team has been established to locate speculators and manipulators who intentionally tried to destabilize the cement market.

Tunky said that since all cement factories have been operating at full capacity, the only way to cope with the problem is to increase imports.

Several ministers, including Minister of Trade Satrio Budiardjo Joedono and State Minister for Public Housing Akbar Tandjung, however, took exception to Tunky's arguments about the higher-than-expected increase in demand and the soaring prices.

Engineered

Joedono said that the supply shortage was "engineered" by producers, who themselves controlled the ownership of most cement distributing companies.

Tandjung shared Joedono's view that the sharp rise in the cement price was not caused by the shortage of the supply, which he said remains much higher than demand.

"The supply scarcity occurred because many people hoarded cement to push up prices," Tandjung said

Tunky contended that the higher-than-expected increase in demand was caused by the sharp increase in construction projects in Jakarta and West Java during the January-August period.

"As you see, many contractors are rushing with their project construction during the prolonged dry season and many government projects usually start in the third quarter" he said about the reasons for the astronomical increase in demand for cement.

In a related development, Sudwikatmono, president of PT Indocement, the country's largest single cement producer, also blamed the unusually high increase in the cement demand for the steep price rise.

Sudwikatmono announced yesterday that the demand on Java had risen by 30 percent.

He added, however, that the cement prices would decline again when the additional imports arrive within the next few weeks.

Indocement itself, he said, would import two million tons of cement and clinker from China, Malaysia and Thailand within the next 15 months.

Tunky said that many property developers have speeded up the pace of their construction projects in anticipation of the rainy season, which usually begins in October.

Indonesia's total cement production capacity reaches around 21.3 million tons a year and annual demand was estimated at 20.1 million tons.

Tunky said that the cement industry's capacity had increased by around 3.3 million tons with the recent expansion of the East Java-based Semen Gresik and the West Sumatra-based PT Semen Padang by 2.3 million tons and one million tons, respectively. (hen/rid/vin)