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Cement price rise in Indonesia has a knock-on effect

Apr, 03 2012

(Indonesia)  --  Cement manufacturers in Indonesia plan to raise retail prices in relation to the government’s plan to hike fuel and electricity price. This development is likely to further increase property prices from the current high.

The Indonesian government plans to raise the subsidized fuel price to Rp 6,000 per liter as of April from the current Rp 4,500, along with a possible increase in the electricity tariff by 10 percent.

PT Semen Gresik, the nation’s largest cement producer, announced its plan to increase the cement price. Agung Wiharto, Semen Gresik head of investor relations, said that if the fuel costs increase by 33 percent, the company’s overall costs may soar 5 to 6 percent.

“The plan to raise cement prices is not to take advantage of the [fuel and electricity] price hikes, but only to offset our growing costs,” he told The Jakarta Post on Tuesday.

Higher prices will aversely affect consumers’ plans to build and to renovate their houses.

“Seventy percent of our cement consumption is used by retail consumers, who will be affected most by fuel-price hike.” He said.

“The [cement] price increase may vary depending on the location of the plants and distribution points, because the burden is on transportation costs,” said Indonesian Cement Association (ASI) chairman Urip Timuryono.

PT Lippo Karawaci (LPKR), the nation’s largest listed property firm, said the increase in cement prices, along with other price increases, would have a big impact on property prices.

 “We have not calculated the impact of price hikes to property prices, but they will definitely increase,” Danang Kemayan Jati, Lippo Karawaci’s vice president and head of corporate communication, told the Post.

“Cement and steel prices have big impacts on property because they are the raw materials.”

Price increases are likely to impact low to medium-end property sales the most, while those for the high-end market would continue to book robust growth, he added.

By: Rashmi Kalia (ARI-C NEWS)

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