To keep up with growing demand for cement in the domestic market, local and foreign producers have earmarked spending of up to $6.68 billion in the next four years to build and expand manufacturing plants for the building material.

The investment is expected to boost the country’s cement production capacity to 108.8 million metric tons by the end of 2017, from 60.5 million tons at the end of last year.

Some established companies have already announced their plans to invest a total of $4.83 billion over the next four years to expand their production capacities by an agregate total of 35.3 million tons.

This includes investments from state-owned Semen Indonesia, the country’s largest cement maker, as well as from rivals Indocement Tunggal Prakarsa, Holcim Indonesia, Semen Bosowa Maros and Lafarge Cement Indonesia.

Newcomers, on the other hand, are expected to invest a total of $1.85 billion for 13 million tons of manufacturing capacity. These investments are from Chinese producers China Triumph and Anhui Conch Cement; Siam Cement from Thailand; Jui Shin Indonesia from Taiwan; and Semen Merah Putih of Singapore-listed palm oil producer Wilmar International.

“Our cement sales have grown by more than 10 percent over the past several years, much higher than our economy’s [overall] growth,” Panggah Susanto, director general at the Industry Ministry, told Investor Daily last week.

The country’s cement sales grew by 18 percent in 2011 to 48 million tons and by 15 percent in 2012 to 55 million tons, according to data from the Indonesia Cement Association.

Meanwhile, cement exports plunged by 57 percent in 2011 and 83 percent in 2012. Some producers have said they have been forced to reduce exports in order to fulfill local demand.

“This trend would continue at least until 2017 to 2018,” Panggah said, adding that he projected the country’s cement demand would reach 85 million tons by the end of 2017.

Panggah also noted that Indonesia was rich in limestone and clay, two main ingredients in cement, providing a low-cost environment for manufacturing operations.

Agung Wiharto, corporate secretary of Semen Indonesia, said massive government infrastructure projects and strong housing demand “would support cement sales to outpace economic growth.”

There is about Rp 744 trillion ($77 billion) worth of infrastructure development projects expected for the 2013 to 2017 period, Agung said.

Mulyanto Broto, chief operating officer of Semen Bosowa Maros, said the company would focus on maintaining its market lead in eastern Indonesia, where cement sales have seen rapid growth.

Cement consumption in Maluku and Papua rose 55 percent to more than 1.2 million tons last year, from 790,889 tons in 2011.

Under the government’s economic master plan (MP3EI), Papua, Maluku and East and West Nusa Tenggara will host some ambitious projects such as a $3 billion petrochemical complex in Bintuni Bay, West Papua.

Java accounted for 55 percent of total domestic cement sales last year, followed by Sumatra (22 percent), Sulawesi and Kalimantan (7 percent each), with eastern Indonesia accounting for the rest.

Source: Jakarta Globe