Two cement producers defend price increase

JAKARTA (JP): Two state-owned cement companies, PT Semen Padang and PT Semen Tonasa, defended their recent decisions to increase the prices of their products to exceed the government- set local price references.

In a hearing with Commission VI of the House of Representatives yesterday, president of Semen Tonasa Soebyakto said his company's main concern was not to meet the government's price references but to overcome cement shortages by raising prices.

He acknowledged that his company did not consult with the ministers of finance and industry before deciding to raise its sales price.

"If we had to wait for the government's consent, we might have faced serious losses as our production costs grew higher than the reference price level, which was introduced early last year," Soebyakto said. "So, let's not talk about the reference pricing system now. It's the government's business, not ours."

Sharing Soebyakto's view, president of Semen Padang Nizar D. Kayo stated that his company suffered financial losses in the first semester of this year because its sales price was 1.35 percent higher the production costs.

Nizar explained to the commission -- which deals with manufacturing, mining and energy -- that during the January-June period, his company suffered losses of Rp 225 million (US$104,000).

Effective in July, the West Sumatra based Semen Padang, raised its sales price by four percent to Rp 5,775 per 40-kilogram sack at its warehouse. This resulted in the increase of cement prices in the market place to about Rp 6,600 per sack, far above the local reference price of Rp 5,930.

Soebyakto said the prices of the South Sulawesi-based Semen Tonasa's cement at market places have also increased to Rp 6,600 per sack.

Criticism

However, a member of the commission, Iskandar Mandji, criticized the two companies's unilateral decisions to raise sales prices because the establishment of prices references was aimed at stabilizing the market.

"Because your companies are state-owned, what you have done could set a bad precedent. You decision indicates that state companies are not concerned with the welfare of the public," Iskandar remarked.

Responding to Iskandar's comment, Nizar said the other mission of state companies is to garner profits so that they will continue to healthy operations.

"If my company continues to suffer from losses it cannot expand to meet the increasing demand. On the one hand, we have to stabilize cement prices but, on the other hand, we have to meet increasing demand," Nizar said.

Currently, Semen Padang has a production capacity of 2.9 million tons per annum or 13 percent of the country's total production capacity of 22.9 million tons, while Semen Tonasa's annual capacity is 1.2 million tons.

Semen Padang is assigned to distribute its products in Sumatra and Semen Tonasa in eastern provinces.

Indonesia's demand for cement this year is expected to reach 20.9 million tons. However, substantially increasing demand in several provinces during this dry season has caused supply shortages.

To meet increasing demand in eastern provinces, Semen Tonasa has been committed to import 70,000 tons of cement from China and 50,000 tons of clinker -- a substance used in the production of cement -- from South Korea and Thailand.

Demand for cement in Java, which accounts for almost 70 percent of the country's total cement utilization, is met by four companies. They are PT Indocement Tunggal Prakarsa, the country's largest cement firm with an annual capacity of nine million tons, PT Semen Cibinong, PT Semen Nusantara and PT Semen Gresik. (rid)