Oversupply of 2m tons of cement predicted for 1997

Oversupply of 2m tons of cement predicted for 1997

By Riyadi

CIBINONG, West Java, (JP): Indonesia, plagued by cement
shortages in past years, is projected to see an oversupply of
over 2 million tons of cement in 1997.

Director of Non-Metal Mineral Industry Agra Kusuma forecast
here Tuesday that overall cement supply would reach 30.9 million
tons this year, of which 29.58 million tons would come from
domestic cement plants and the remaining 1.34 million tons from
committed imports.

He projected that domestic demand for cement would grow by 13
percent to 28.86 million tons in 1997, up from 25.5 million tons
in 1996.

"Unlike in past years, we expect there will be no more cement
crises in the years to come, starting 1997," Agra said when
attending an end-of-year thanksgiving at PT Indocement Tunggal
Prakasa's plant complex here.

Since early 1990s, Indonesia had been struck by annual cement
crises, driven by supply shortages especially during the second
semester when developers started construction of public and
private projects.

The government then encouraged domestic cement producers as
well as general importers to import cement to satisfy the growing
domestic demand. It also established cement floating terminals to
smoothen the flows of cement distribution both from domestic
producers and importers.

Last year, no major cement shortages were reported in the
country. Only some minor cases, especially price increases, were
recorded in some areas. "However, they were still tolerable and
manageable," Agra said.

This year's increase in the cement supply from domestic plants
would be made possible with the operation of three new cement
expansion projects in Java, with combined installed capacity of
6.2 million tons per annum.

They come from state-owned PT Semen Gresik's plant in Tuban,
East Java, with annual capacity of 2.3 million tons, PT Semen
Nusantara's plant in Cilacap, Central Java, with 2.6 million tons
and Indocement's plant in Cirebon, West Java, with 1.3 million
tons.

All the plants will start commercial production in the first
quarter of 1997, Agra said.

With the addition of 6.2 million tons, the combined capacity
of domestic cement producers would reach 33.52 million tons this
year, up from 27.32 million tons in 1996.

There are presently nine cement producers in Indonesia,
comprising five state-owned firms and four private companies
spread throughout the country.

They include Semen Gresik with its affiliated companies PT
Semen Padang in West Sumatra and PT Semen Tonasa in South
Sulawesi, Indocement, Semen Nusantara, PT Semen Cibinong in West
Java, PT Semen Andalas Indonesia in Aceh and North Sumatra, PT
Semen Kupang in East Nusa Tenggara and PT Semen Baturaja in South
Sumatra.

The Indonesian Cement Association has predicted that Indonesia
will see an increase in combined installed capacity by 12.75
million tons per annum in 1998.

The increase will come from expansion projects, including
those at Semen Cibinong with an annual capacity of 2.6 million
tons, Semen Gresik in Tuban with 2.3 million tons, and Semen
Padang with 2.3 million tons.

Expansion

The increase will also come from upgraded plants, including
those at Semen Baturaja with 600,000 tons capacity and Semen
Andalas with 600,000 tons, and new cement plants owned by new
companies, including PT Indo Kodeco Cement in South Kalimantan --
an affiliate of Indocement -- with 2.45 million tons, PT Bosowa
Maros in South Sulawesi with 1.6 million tons annual capacity and
PT Bintang Mandiri in Tuban with 600,000 tons.

In addition, Semen Gresik is expected to stop the operation of
one cement plant with an annual capacity of 500,000 tons in 1998
due to inefficient facilities.

Therefore, combined installed capacity of all domestic cement
producers is projected to reach 46.27 million tons per annum in
1998.

The association has predicted that the total output of all
cement plants will reach 36.54 million tons in 1998 because new
cement plants usually run far below capacity.

Domestic demand is expected to grow by 12 percent to 33
million tons in 1998. Therefore, Indonesia may see an oversupply
of cement of over 3.5 million tons in 1998.

The association's chairman, Soepardjo, forecast that Indonesia
would have cement surpluses until year 2002.

"Therefore, we urge the government to adopt a flexible export-
import policy on cement so that we can easily export all the
surpluses," he said.

As a result of cement shortages in past years, the government
has limited cement exports. Instead, it encourages domestic
producers to expand their capacity to meet increasing domestic
demand.

Consequently, Soepardjo said, Indonesia's cement producers
could not easily export their surpluses even though the
government allows them to do so because they have no contract
with buyers.

"Even Singaporeans do not want to buy cement from us. They
consider Indonesia's cement producers unreliable because we are
usually forced to cut exports arbitrarily whenever there is a
domestic cement crisis," Soepardjo said.

He noted that the five largest local cement producers --
Indocement, Semen Cibinong, Semen Gresik, Semen Padang, Semen
Tonasa -- had signed contracts to export 685,000 tons of cement
this year.

Daddy Hariadi, director for research and development at
Indocement, noted that new investment in the cement industry
remained attractive due to the rapid increase in domestic demand
for cement.

He noted that the prevailing cement consumption per capita in
Indonesia was relatively small, standing at 123 kilograms in
1995, compared with 147 in the Philippines, 533 kilos in Malaysia
and 1,182 kilos Singapore.