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Nov, 06 2000




The local cement market had been sluggish during the past three years, after the government and private sectors halted or cancelled their construction projects. Domestic consumption in the period dropped by nearly 50 percent compared to those recorded in the industry's golden era of 1994-1997. At that time, Indonesia had to import 5 million tons to cover the shortage of cement on the local market.

The monetary crisis came in mid-1997, bringing big troubles to almost all business sectors in the country. Hugh capitals invested in the cement industry in 1995-1997 became useless as local demand was only a half of the industry's production capacity. Many cement producers suffered big losses, including the biggest three - Semen Gresik (JSX:SMGR), Indocement Tunggal Prakarsa (JSX:INTP) and Semen Cibinong (JSX:SMCB).

On the other side, however, the depressed local market has forced cement producers to seek more opportunities to increase exports. Total exports in 1998 reached 3.8 million tons with a value of US$84.7 million, or jump up 375 percent in volume from 0.8 million tons worth US$33.6 million in 1997.

Despite the deteriorating local market, the country's cement industry remained attractive for the world's cement producers. Heildelberg Zement Ag of Germany is currently waiting for certainty to buy a stake in Indocement, Holderbank of Switzerland is in negotiations to become a majority shareholder in Semen Cibinong, while Cemex SA de CV of Mexico is trying to increase its stake in Semen Gresik. In the meantime, LaFarge of France already holds 16 percent of Semen Andalas' shares.

Analysts said there were reasons behind the strong interest of world's major cement makers in Indonesian cement producers: the low prices of shares, the low selling prices of cement, and the small domestic market.

They said that buying cement shares in Indonesia cost less than building new factories. The average price of Semen Gresik's shares, for instance, was only US$68 per ton of capacity, compared to around US$120 per ton of capacity needed to build a cement factory with a similar size. Moreover, the local cement producers have established, popular with significant market shares.

The average selling price of Indonesia's cement on the world market costs only US$50 per ton, compared to $60-$80 per ton of cement exported by Malaysia, Thailand and other producing countries. In the domestic market, the average price was only $20 per ton, creating a protection for local producers from their foreign rivals.

The current small domestic market also created possibilities of high demand growth in the future. Indonesia's per capita consumption of cement now reached only 50 kilograms, compared to around 1 ton in Singapore and Japan. If the country's economy recovers, the local consumption rate is expected to grow fast.

The signals of the economic recovery have already appeared. The domestic demand for cement has shown a tendency to increase. Semen Gresik, for instance, has recorded a 20 percent rise in the first eight months of 2000 and Semen Cibinong was expected to increase its capacity usage from 65 percent last year to 70 percent this year.


Semen Gresik forecast that Indonesia's consumption of cement would rise 10 percent this year to 21 million tons. The company's prediction was based on its sales which totaled 5.5 million tons in the first five months of this year. It said demand for cement began to rise especially from individual consumers.

However, the company said that it saw no sign of increase in exports this year after substantial success in 1999 when exports surged 100 percent to 9.05 million tons compared with in 1998.

The country's cement export is projected to reach 10 million tons in 2000.

Total production capacity in the next 3-5 years is predicted to reach 60 million tons, following the government's approval on 10 new projects in the cement industry. On the other side, with an assumption of 10 percent growth, domestic demand for cement in the next five years is expected to reach only 35 million tons.


There are 10 cement producers currently operating in Indonesia, while three newcomers are expected to run business this year.

** PT Indocement Tunggal Prakarsa

Indocement is the biggest player in Indonesia which operates 11 manufacturing plants with an annual output capacity of 13.2 million tons. Its market share reached 27.6 percent in 1999.

In the near future, the company will hold an extraordinary shareholders meeting to make a decision on the restructuring of its $1 trillion debts. If the decision is already taken, Heidelberg will enter into the company by buying stakes of Salim Group in Indocement.

** PT Semen Gresik

State-run Semen Gresik runs 11 plants with total annual output capacity of 18.1 million tons. Its market share reached 44.8 percent in 1999.

In 1998, Cemex SA de CV of Mexico, the world's third-biggest cement maker, was selected by the government as the winner of a tender for a 14 percent stake in Semen Gresik, with an offer of US$1.38/share. Cemex was also allowed to buy another 11 percent on the Jakarta Stock Exchange (JSX).

The Mexican cement producer currently expressed its intention to become a majority stakeholder in Semen Gresik. President Wahid has reportedly given a green light to Cemex's plan.

** Other producers based on their annual output capacities and market share (1999) are:

- PT Semen Cibinong (publicly-listed)..... 9.7 million tons
- PT Semen Padang (state-run)............. 5.9 million tons
- PT Semen Tonasa (state-run)............. 3.5 million tons
- PT Indo Kodeco (privately-run).......... 2.5 million tons
- PT Semen Bosowa (privately-run)......... 1.8 million tons
- PT Semen Andalas (privately-run) ....... 1.3 million tons
- PT Semen Baturaja (privately-run)....... 1.2 million tons
- PT Semen Kupang (state-run)............. 0.3 million tons
** Newcomers:
- PT Maluku Dinamika ..................... 2.3 million tons
- PT Semen Gombong ....................... 1.8 million tons
- PT Bintang Mandiri ..................... 0.6 million tons
(Source: The Association of Cement Producers/ASI)


(in millions of tons)
1996 1997 1998 1999
Capacity 27.2 33.5 44.9 47.3
Production 24.5 27.5 22.3 24.0
Demand 25.4 27.4 19.2 18.8
Production-Demand (0.9) 0.1 3.1 5.2
Export 0.3 0.8 4.4 9.0
Demand Growth 6.0% 7.9% (29.8%)(2.5%)
2000 2001 2002 2003 2004 2005
Capacity 47.9 49.6 49.6 49.6 49.6 49.6
Production 34.8 45.0 45.7 45.6 45.9 45.9
Demand 21.8 24.0 26.4 29.0 31.9 35.1
Production-Demand 13.0 21.0 19.3 16.6 14.0 10.8
Export 13.0 21.0 19.3 16.6 14.0 10.8
Demand Growth 16.2% 10.0% 10.0% 10.0% 10.0% 10.0%


Graha Irama 11th Floor

Jl. HR Rasuna Said Blok X-I Kav. 1-2 Jakarta 12950

Phone: (62-21) 526 1105, 526 1106

Fax: (62-21) 526 1108


Wisma Indocement 8th Floor

Jln. Jendral Sudirman Kav. 70-71 Jakarta 12910

Phone: (62-21) 251 2121

Fax: (62-21) 251 0066



Gedung Utama Semen Gresik

Jl. Veteran Gresik 61122 East Java

Phone: (62-31) 398 1732 - 398 1745

Fax: (62-31) 398 3209


(C) 2000 Asia Pulse Pte Ltd

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