Indonesian Cement Association Proposes Moratorium on New Plant Construction Permit

By : Hariyanto And Aldi Firhand. A | Friday, August 25 2017 - 21:06 IWST

Illustration of cement industry. (Merdeka / Dwi Narwoko)

INDUSTRY.co.id - Jakarta - The Indonesian Cement Association (ASI) is responding to the higher supply surplus, reaching 106 million tons, exceeding domestic demand of only 63 million tons or only 60 percent. The installed capacity of existing manufacturers exceeded the demand for cement over the past two years.

ASI claimed to have proposed to the government to conduct a moratorium related to licensing the construction of new plants for cement companies this year. The goal, so that more optimal utilization.

"We have written to the government for a moratorium on new permits, but the factories that have already obtained permission will continue," said ASI Chairman Widodo Santoso in Jakarta, Thursday (8/24/2017).

According to him, this condition is the impact of many local entrepreneurs who scramble to expand in 2014. For information, at that time cement is still imported because of insufficient capacity. "Finally in 2015 many new cement plants are emerging to meet domestic demand," he continued.

The investment is excessive so that the growth of cement capacity is not directly proportional to the growth of consumption. Should, according to Widodo, investors need to take account of annual demand before developing capacity.

Domestic cement consumption in July 2017 amounted to 5.59 million tons, an increase of 54.5% on an annual basis or year on year (yoy). While in the previous month, cement consumption fell 26.8 percent to 3.73 million tons. For the period from January to July 2017, cement consumption was 34.6 million tons, up 4.4% on an annual basis.

Demand for cement, continued Widodo, rose on average by 5% or about 3 million tons. This creates a balance point between production capacity and new demand will be achieved within 10 years. In fact, in the year 2026 also according Widodo capacity will remain higher.

With this oversupply market condition, the price of cement has decreased every year from 8% to 10%. Prices have plummeted since the end of 2015.