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CEMENT BUSINESS – JAKARTA. The political year does not deter cement producers from setting optimistic targets this year.
PT Indocement Tunggal Prakarsa Tbk (INTP) predicts national cement consumption in 2024 to grow 2% to 3% this year. Indocement's Corporate Secretary Dani Handajani believes that this year's cement sales will be driven by the construction of the Nusantara State Capital and its supporting facilities.
Cement sales are also supported by the increase in the government's infrastructure budget in 2024, the return of Indonesia's economic growth rate to the pre-pandemic era, and controlled inflation rates which are expected to lower interest rates.
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On the other hand, the completion of the acquisition process of Semen Grobogan by Indocement will have a positive impact on the total volume of Indocement's sales. This is because INTP has gained an additional cement sales volume of 1.5 million tons that has been sold by Semen Grobogan so far.
In addition, the presence of the new factory also allows Indocement to synergize and optimize the cement marketing network in Central Java and East Java. "So it can open up new market niches for the penetration of various Indocement cement products," Dani told Kontan.co.id recently.
PT Cemindo Gemilang Tbk (CMNT) estimates that cement sales growth can reach 5%-7% this year. Cemindo Gemilang Director Ameesh Anand said, in general, cement demand is driven by the trend of Indonesia's economic recovery this year which is expected to continue. Several sentiments are driving the prospects for cement this year.
Firstly, the revival of the cement industry is driven by optimism about the normalization of commodity prices such as coal that will continue this year. The decrease in coal prices is believed to reduce CMNT's production costs.
Secondly, the acceleration of the sustainability of the construction of the Nusantara Capital City (IKN) in East Kalimantan and more equitable infrastructure development throughout Indonesia also has a positive impact on CMNT. The construction of IKN and its facilities can also support the Indonesian economy from the possibility of an economic slowdown.
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Thirdly, the potential for a decrease in interest rates, controlled inflation targets and tax exemption incentives for the purchase of houses priced below IDR 2 billion will be a positive sentiment for the property sector. Residential property sales, which are predicted to grow by about 7% this year, will drive an increase in cement demand, especially for bagged cement sales.
Meanwhile, PT Solusi Bangun Indonesia Tbk (SMCB) has not been able to convey this year's sales target specifically. However, SMCB President Director Lilik Unggul Raharjo believes that the opportunity for cement demand growth will still exist. One of the drivers is the housing backlog condition of about 12.7 million houses.
In addition, the construction projects run by the government also provide opportunities for the absorption of existing supply. To boost performance, this subsidiary of PT Semen Indonesia Tbk (SMGR) will still focus on operation excellence and asset optimization.
"We will also continue to strengthen synergy with SMGR in market management and distribution networks, run innovations to achieve efficiency both in terms of costs and operations such as the use of alternative raw materials and fuels," Lilik explained to Kontan.co.id last week.
SMCB also expands growth opportunities through strategic cooperation with Taiheiyo Cement Corporation for export channeling and technology transfer.
Challenges in 2024
That does not mean that this year's cement market is devoid of challenges. Lilik believes that the cement industry will still face the same challenges, namely tight market competition. This is because the supply and production capacity is higher than demand.
The inflation condition that affects people's purchasing power, as well as macro conditions such as geopolitics that indirectly affect fuel prices, also overshadow the cement industry.
Similarly, Dani believes there are several factors that INTP is wary of this year. From the external, this Three Wheels cement producer is wary of the escalating scale of conflict in the Middle East and the Russia-Ukraine conflict. If a major war occurs, it will impact the increase in various energy and commodity prices, which will certainly disrupt the growth of the Indonesian and global economy.
This year, Indocement has prepared a capital expenditure (Capex) of IDR 1.2 trillion to IDR 1.5 trillion. Dani mentioned, this capex will be used for factory repairs and maintenance.
Meanwhile, CMNT has allocated a capex of IDR 600 billion this year, which is used among other things to increase efficiency on the factory production line, optimize CMNT's logistics aspects, and purchase electric vehicles.
