INDONESIA: French and Chinese Investors Build New Cement Plant

Two large cement producers from France and China plan to build factories in Indonesia. French cement producer, Lafarge Cement, is looking at building a factory in East Java, while China Triumph International Engineering Co Ltd, has plans for a cement factory in Grobogan, Central Java.

However, Industry Minister Muhammad Sulaiman Hidayat wants Lafarge to build the plant outside of Java to ensure industrial development is spread across the country. Other alternatives besides Java include Langkat, North Sumatra.

Lafarge has invested US$300 million to build a plant in Aceh that has a capacity of 1.6 million tons per year. The new plant is projected to have the same capacity as the factory in Aceh. However, the value of the new investment is still unknown. “They are still calculating the required investment,” said Hidayat.

Industry-based manufacture director-general, Panggah Susanto, said the construction of the plant belonging to China Triumph in Grobogan had a production capacity of 2 million tons per year. “The investment value reaches US$350 million,” he added.

Indonesian Cement Association chairman Urip Timuryono, predicted that consumption would rise by 7.5 percent to 43 million tons this year. “Cement consumption is still mostly based in Java with 65 percent, Sumatra 29 percent, and Kalimantan and Sulawesi with 10 percent,” he said.

Urip said the demand for cement was high this year following positive property growth. He said that average cement production reached 66 million tons per year nationwide. Around 43 million tons from this is absorbed domestically while the rest is exported. 

According to data from the Industry Ministry, cement production will reach 53 million tons this year, up from 40.7 million tons last year. From 2012 – 20 13, capacity is expected to increase by 6.8 million tons, after million-dollar investments from three local producers; PT Semen Gresik Indonesia, PT Semen Tonasa and PT Holcim Indonesia.

Although producer and market expansion continues, cement exports are expected to fall. This year’s exports are 1.5 million tons, a decrease from last year’s 1.5 – 2 million tons. The solid cement texture makes exports relatively hard. “The transportation cost for exports is high but the cement must be sold cheaper. This would hurt the producers’ margins,” said Urip.