More cement imported to curb prices

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)