Construction Boom Spurs Q1 Growth in Cement Sales
Dion Bisara & Tito Summa Siahaan
Cement sales in Indonesia rose in the first quarter from the same period a year earlier, suggesting growing demand from property and construction companies.
Industry-wide sales jumped 18 percent to 12.5 million tons in the January-to-March period, cement maker Semen Gresik reported, citing data from the Indonesian Cement Association (ASI).
Cement sales, along with vehicle and motorcycle sales, are a leading economic indicator in Indonesia. Rising cement and vehicle sales suggest Indonesia’s economy, Southeast Asia’s largest, will remain robust despite concerns of a global slowdown.
“Rising cement sales indicate that our economy keeps on growing,” Bank Mandiri chief economist Destry Damayanti told the Jakarta Globe on Friday.
Cement sales in March alone rose 16 percent to 4.4 million tons from 3.7 million tons in the same month in 2011, according to data from Semen Gresik.
Bank Indonesia, the central bank, which kept its benchmark rate at a record low 5.75 percent on Thursday, forecast economic growth of 6.5 percent in the first quarter this year. The Central Statistics Agency (BPS) is due to announce first quarter gross domestic product data in early May.
The cement news boosted shares of several cement makers, including Semen Gresik, Holcim Indonesia and Indocement Tunggal Prakarsa.
Shares in Semen Gresik, the country’s largest cement maker, rose 1.2 percent to Rp 12,300 on Friday. The shares have risen 7.4 percent so far this year, compared to the benchmark stock index’s 8.8 percent gain.
Shares in Holcim Indonesia rose 2 percent to Rp 2,500 on Friday, bringing the year’s gain to 15 percent.
Meanwhile, shares of Indocement Tunggal Prakarsa rose 1.4 percent to Rp 18,800 on Friday. For the year, they have gained 9.6 percent.
Bertrand Raynaldi, head of research at eTrading Securities, said cement companies had been reorienting themselves toward domestic demand rather than overseas markets.
He attributed the strong local demand to the nation’s property boom and rising purchasing power among Indonesians.
“Low-cost borrowing means cheap property credit, while rising purchasing power can be translated to Indonesians having extra income to renovate their houses,” he said.
He said Indonesia’s coming infrastructure boom would affect cement companies in many ways, contributing substantially to the growth of their operations.
“Only a small amount of cement is needed to build a road or a power plant, but infrastructure development will definitely stimulate the construction of residential areas and business centers,” he added.
The Indonesian government plans to ramp up infrastructure projects in the coming years, building more roads, seaports and airports in line with its 15-year growth plan, MP3EI.
“Such infrastructure projects will benefit cement makers,” Bertrand said.
Indonesia’s $813 billion economy expanded 6.5 percent last year, with private consumption accounting for 56 percent of all economic activity.