Semen Padang to build new plant
Rendi A. Witular, The Jakarta Post, Jakarta
PT Semen Padang, the West Sumatra unit of the country's largest cement maker PT Semen Gresik, plans to construct a new cement plant, starting next year, to anticipate future rising demand.
In its recent report to House of Representatives Commission V for trade and industry, the state-owned company said that the plant was estimated to cost US$345 million, with a construction period of around 36 months.
Semen Padang said that the new plant, known as the "Indarung VI" project, would have an installed capacity of 2.3 million tons per year. Currently, the company's installed capacity is 5.24 million tons annually.
Next year, the company will start carrying out an environmental impact assessment for the plan, designing the machinery and preparing infrastructure and the mining site.
However, it remains unclear how the company will finance the project.
Semen Padang said the reason for the construction of the new plant was to anticipate soaring demand, both at home and in the export market, starting in 2009 or 2010.
The company said that assuming the local economy would grow at around 8 percent per year during the period, cement demand at home was projected to soar to 46.5 million tons per year compared with the current 27.5 million tons, while exports would jump to 12 million tons to 15 million tons.
It said that the existing capacity of local cement producers would not be able to meet such high demand.
Semen Padang produced 4.55 million tons of cement last year, down from 5.01 million tons in 2002.
In its unaudited financial report, the company said that last year it booked a 4 percent increase in sales to Rp 1.58 trillion (US$188 million) from Rp 1.52 trillion in 2002. The company's operating profit jumped to Rp 134 billion from Rp 121 billion, with a net profit of Rp 66.9 billion, up from Rp 39.8 billion.
The feasibility of Semen Padang's plan, however, is in question, since other cement producers have currently decided not to build a new plant, as local demand remains low and exports are considered not to be lucrative due to high shipping costs.
According to the Indonesian Cement Association (ASI), the industry has utilized only 63 percent of its installed production capacity, down from 65.5 percent in 2001, meaning that the industry is burdened with the extra cost of maintaining idle machinery.
The country's total domestic cement sales grew by only 1 percent last year to 27.5 million tons from 27.2 million in 2002, due to the slow pace of recovery in the property sector, as well as slow progress in government development projects.
The producers said that with current installed production capacity, ideal sales growth should be around 8 percent to 10 percent, or twice the country's economic growth rate, in order for the industry to be feasible.