The cement industry in Indonesia is a rapidly growing sector becoming increasingly essential to the country’s economic development. Primadi Soerjosoemanto, Asian Insiders partner for Indonesia explores developments, the role of government policy and the opportunities available in Indonesia for the construction sector.
In 2022, the global cement market was valued at approximately USD 340 billion exhibiting a CAGR of 5.1% according to Fortune Business Insights. While the pandemic led to reduced demand and some stagnation across Indonesia, pent-up demand has led to resurgent activity in the sector. It is estimated that the cement industry in Indonesia contributes around 5% of the country’s GDP and employs up to one million people.
Indonesia is the fourth most populous country in the world with around 270 million people and has a pressing need for further public infrastructure and commercial building, strongly exacerbated by the construction of the new capital, Nusantara, commenced just last year. The cement industry in Indonesia produces an estimated 64-66 million metric tons annually, making Indonesia the sixth leading cement producer globally. Facing forward, the sector expects considerable growth with demand from developers anticipating many new construction projects including, again, the construction of an entirely new capital in the jungles of Borneo island. Further, President Joko Widodo has staked the economy on sustained growth, setting the nation as a “global maritime axis” with 24 large seaports and 1,500 smaller harbour projects. All this along with growing urbanization of population centres means that Indonesia will be under construction for years to come.
The Bandung Institute of Technology has estimated a 33% rise in Indonesian cement consumption to 84 MT/year from the start of construction of the country’s new capital city. The national coal consumption is also forecasted to rise accordingly by 9% to 127 MT/year. Indonesia’s largest cement producer, PT Semen Indonesia say they plan to focus more on the domestic market due to the better availability of coal supplies. PT Semen Indonesia, with 41% market share, has revealed a net profit of IDR 2 trillion in 2021, with the government receiving IDR 522 billion due to 51% share ownership. This suggests that the government continues to maintain a critical role in the cement industry as both supplier and as major end customer, adding weight to calls from the sector for greater government involvement, particularly for the smaller, locally owned players.
Concerns facing the cement industry in Indonesia include rising production costs including energy, as well as concerns over the environmental impact of cement production with some instances of local unrest around provincial plants.
However, despite the rise in domestic demand, several key players in the cement industry in Indonesia intend to develop their export market, notably to China, the world’s largest consumer of cement. Other export markets under development include Bangladesh, Taiwan, Australia and the USA.
Of the various international players in the cement industry in Indonesia, key companies include –
German-based Beumer Group have secured a contract with Semen Tonasa to supply its 50 – 50 kg bag palletising system for their Celukan Bawang Cement plant in Bali. The target is to install and commission their multi-phase packing adjustment system by mid-late 2023.
State-run Solusi Bangun Indonesia contracted the Swedish firm to supply a Siwertell screw-type ship loader via contractor Hutama Karya. The ship loader will be used at the Tuban terminal in Java with a continuous cement handling capacity of 1000t/hr. It will be assembled on site and is planned for delivery at the end of 2023.
Through its majority shareholding in PT Indocement which holds around 24% market share, the German company directly owns five cement subsidiaries with a further 18 indirectly owned and involved in business related to the production and sale of cement, ready-mixed cement and aggregates.
There is a range of further multi-national partnerships emerging in the cement industry in Indonesia as world demand continues to surge and countries such as USA and China seek to secure their long-term supply.
Asian Insiders has a strong presence in Indonesia with experience and considerable resource on the ground. A consideration to enter the cement industry in Indonesia will require considerable research, planning and preparation. For a no-obligation call, please contact Jari Hietala, Managing Partner: jari.hietala(at)asianinsiders.com or Primadi Soerjosoemanto, Indonesia Partner: Primadi.soerjosoemanto(at)asianinsiders.com