DOMESTIC DEMAND FOR CEMENT EXPECTED TO INCREASE

By Andi Abdussalam

Jakarta, Jan 26 (ANTARA) - Cement companies in Indonesia are expanding their production in an effort to meet increased domestic demand for cement, particularly demand caused by the country's infrastructure development projects.          The government is now carrying out a number of infrastructure development projects as part of its Master Plan for Acceleration and Expansion of Indonesia's Economic Development (MP3EI), which focuses on infrastructure.          Along with the infrastructure development, demand for cement at home is expected to increase by some 10 percent this year.          According to Tuti Rahayu, the Ministry of Industry's director for downstream chemical industry, cement consumption in Indonesia is expected to reach 62 million tonnes this year, up 10 percent from 55 million tonnes in 2012.          "Domestic consumption of cement increased by 14.5 percent last year, compared with 48 million tonnes in 2011. Even in Indonesia's eastern regions, the demand increased by about 54 percent, far higher than other regions of the country," Tuti Rahayu said on Friday.         Therefore, the government has set itself a target to produce 65 million tons of cement this year, up 7 percent over last year, which reached 60.56 million tonnes.         "We have projected cement production of 65 million tonnes in 2013, up 7 percent from last year's production at 60.56 million tonnes. We hope factories would increase their investment and production capacities in order to meet the production target,"  Director General for Manufacturing Industrial Base of the Ministry of Industry, Panggah Susanto, said.            Tuti Rahayu, on the other hand, pointed out that a number of private and state-owned cement firms had begun building new factories across the country, such as in Java, Sumatra, Sulawesi and Papua.         She said that to ideally compensate the infrastructure development growth, there should be two new cement factories built in the country every year.      "The number of factories should be increased to support the MP3EI projects and meet their demand for cement," Tuti explained.          In the meantime,  PT Semen Indonesia president director Dwi Soetjipto said his company was planning to build two new factories, one in Rembang, Central Java, and another one in Padang, West Sumatra, in the second half of 2013.          Each of these new factories will have a capacity of 2.5-3 million tonnes per annum.          At present, PT Semen Indonesia, a holding company of PT Semen Gresik, PT Semen Padang and PT Semen Tonasa, controls 41 percent of the cement market share at home.         The cement sales of PT Semen Indonesia, which is a state-owned firm, reached 22.5 million tons in 2012, up 14.7 percent from sales in 2011 which stood at 19.6 million tonnes.         As demand for cement steadily increases in the eastern regions of Indonesia, PT Semen Indonesia is now exploring the possibility of building a cement factory in Papua.         "We want to build an integrated cement factory in Papua, but the plan will need a huge investment. So, we will carry out the plan in stages. The first thing we are doing is building a packing plant, while exploring the possibility of building a new factory," Dwi Soetjipto said.          The Rp162 billion packing plant in Sorong, West Papua is the 19th plant operated by PT Semen Indonesia. "We hope the presence of the packing plant would have a large multiplier effect for economic development in the region," Dwi said.          He noted that the multiplier effect could be created through tax and redistributions the company paid, employment and increasing demand for other goods and services, such as restaurants, tourism, property development, creative industry and other supporting industries.          "These all will help improve the quality of the local population¿s economy and buying power," he said.          Until now, PT Semen Indonesia has operated 19 packing plants in Aceh, Belawan, Padang, Dumai and Batam in Sumatra, Ciwandan in West Java, Tanjung Priok in Jakarta, Tuban, Gresik and Banyuwangi in  East Java, Banjarmasin, Samarinda and Celukan Bawang in Kalimantan, Tonasa, Makassar, Palu and Bitung in Sulawesi, Ambon in Maluku and Sorong in Papua.         Two more packing plants are now being built in Banjarmasin and Balikpapan in Kalimantan.          Dwi Soetjipto explained that the need for cement in Papua and Maluku provinces in the next several years is expected to increase sharply.      "The presence of the packing plant in Sorong, West Papua, is strengthening the company's existence and business expansion in Papua. This is part of the strategy for the company to get closer to its consumers," Dwi Soetjipto said in a press statement on Friday.          He added that cement markets in Papua and Maluku are growing fast, saying cement sales in the two eastern regions reached 1.22 million tons in 2012, up by 54.8 percent from 790,000 tons the year before.          He said growth of cement sales in the two regions had been the highest in the country, with sales growth in Java in 2012 recorded at only 14.6 percent, in Sulawesi at 16.6 percent, Kalimantan at 21.3 percent and Nusa Tenggara at 13.9 percent.         In the meantime, PT Semen Gresik (under PT Semen Indonesia holding company) has set capital expenditures for its corporate business activities in 2013 at US$400 million.         The capital expenditures will, among other things, be used to build two new factories, which will be built in Central Java and West Sumatra.         Dwi Soetjipto, who is also president director of Semen Gresik, said other corporate activities included integrating Thang Long, a Vietnamese firm PT Semen Gresik has acquired, into the Semen Indonesia holding company.     "But we will need some six months to adjust the administration, accountancy and human resources management of Thang Long into the holding company," he said.         Last month, Semen Gresik acquired 70 percent of Than Long Cement of Vietnam, which was worth about US$157 million.  Through the end of 2012, the total production of Semen Gresik group (PT Semen Gresik, PT Semen Tonasa and PT Semen Padang) was projected to reach 22.6 million tons, while in 2013 it was estimated at 26 million tons.     "If Thang Long's production of 2.3 million tonnes is taken into account, the total production of the group would reach 28.3 million tonnes this year," Dwi Soetjipto said.***3*** (T.A014/INE/o001) (T.SYS/A/KR-BSR/O001) 26-01-2013 15:23: