Economy & Market
Dropping cement demand in Indonesia
Indonesian cement sector is witnessing shrinkage in cement demand. Cement sales declined in Sumatra, Kalimantan, Sulawesi, Bali and Nusa Tenggara. Sales have reduced by 0.4 per cent y/y to 4.52 million tonnes in Indonesia in April 2014. Only Java proved to be an exception with a spike in cement sales, in 1Q14, which were higher by 3.7 per cent, approximately 14 million tonnes. The country has a number of infrastructure projects stuck at the tender stage. Another reason for the drop in demand was the legislative election conducted at the beginning of the month. The central government is now planning a cut on energy subsidies, resulting in higher electricity costs. This will push cement production costs up by 3-5 per cent and force the country´s cement sector to enhance its energy efficiency. The government may offset high energy prices with fiscal incentives.