Chinese Investors Enter Cement Factory in Aceh, Cement Industry Under Pressure

CEMENT BUSINESS - JAKARTA. JAKARTA. The national cement industry in Indonesia continues to record an oversupply, a situation that has led cement business circles to protest plans for new cement plant investments in Aceh Province.

The Indonesian Cement Association (ASI) states that this surplus is reflected in the total installed capacity of the national cement plants, which reaches 119 million tons. However, only 55% of cement production is absorbed by the domestic market.

As a reminder, in 2023, the volume of cement sales in the domestic market grew by 3.5% to as much as 65.5 million tons. Meanwhile, cement export sales grew by 20.22% to 10.7 million tons.

Thus, the total domestic and export cement sales were recorded at 76.2 million tons in 2023, or there was a difference of 42.8 million tons with the installed capacity of the national cement plants.

According to KONTAN's records, national cement consumption is estimated to grow by 2%-3% in 2024. This is influenced by the rampant infrastructure development after the 2024 General Election, including the IKN Nusantara project.

However, the momentum for the growth of the cement industry's performance is potentially hindered. This is because the South Aceh Regency Government (Pemkab) recently signed a memorandum of understanding (mou) with PT Kobexindo Cement, a consortium of Hongshi Holding Group.

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Moratorium on permits

The company from China plans to build a cement plant in South Aceh with a capacity of 6 million tons per year with an investment injection of IDR 10 trillion.

This plan has sparked controversy. The Director of Cement Industry, Ceramics, and Mineral Processing at the Ministry of Industry (Kemenperin), Putu Nadi Astuti, believes that the South Aceh Regency Government should coordinate with Kemenperin, which is aware of the current condition of the national cement industry.

"Kobexindo Cement cannot process further business permits, including environmental permits. The Online Single Submission (OSS) system is locked due to a moratorium policy on cement industry investment," Putu revealed on Wednesday (29/5).

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The construction of a new cement plant in Aceh will certainly impact existing cement producers, especially in the Sumatra region.

Currently, Sumatra is the operational area of three state-owned cement producers, namely, PT Semen Padang with a production capacity of 11 million tons per year, PT Semen Baturaja with 3.85 million tons per year, and PT Solusi Bangun Andalas with 1.65 million tons per year.

The Director of Manufacturing at PT Solusi Bangun Indonesia Tbk (SMCB), Soni Asrul Sani, hopes that the moratorium on permits for the construction of new cement plants can continue to be upheld to increase the utilization of production and absorption of cement in the domestic market.

"The total capacity of cement producers in the Sumatra region is still able to meet existing demand, so there is no need for additional new cement production capacity," he concluded on Wednesday (29/5).