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Estimate of Cement Consumption Growth in Several ASEAN Countries, 2014
National Cement Industry Outlook
In 2015, global economy recovery as presented by United States’ economy in 2014 is expected to
continue and escalate to other developed countries. Improvement of global economy is believed to bring
positive impacts to national economy, boost demands for primary mining and plantation products, and
lowering Indonesia’s trade balance deficit. In turn, this will strengthen Rupiah exchange rate and allow
Bank Indonesia to bring down interest rate, creating a more favourable condition to Indonesian economy.
As national economy improves, growth of national cement consumption will increase.
As mentioned earlier, the Government of Indonesia now has better fiscal room to support basic
infrastructure projects that is previously limited due to sizeable fuel subsidy. Approval of Revised Budget
and Expenditure Plan 2015 enables the Government to focus on realizing programs of basic infrastructure
development, including roads and ports, which have been the barriers for investments in real sectors
and hindering national economic growth potential. Realization of infrastructure projects will step up
national cement consumption. Taking this outlook into account, the Company
forecasts that national cement consumption in 2015 and 2016 will grow by 6.3 and 7.5,
respectively. Projection of National Cement Consumption 2015-
2016
Regional Cement Consumption Prospect
As we know, the end of 2015 will be marked by the implementation of ASEAN Economic Community
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80.00 70.00
60.00 50.00
40.00 30.00
20.00 10.00
31.49 39.09
58.02 34.17
48.00 63.68
31.92 40.78
59.91 38.09
54.96 68.48
20.0 18.0
16.0 14.0
12.0 10.0
8.0 6.0
4.0 2.0
0.0 4.2
1.2 7.0
2.6 4.3
17.7 14.5
5.6 3.3
6.3 7.5
Y2005 Y2009
Y2013 Y2007
Y2011 Y2015 E Y2016 E
Y2006 Y2010
Y2014 Y2008
Y2012 Consumption million tons
Growth
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AEC, a new economic zone that include all ASEAN countries. In total, this region is home to 600 million
people and Indonesia accounts for 40 of the population.
Integration of economic zone will create a highly dynamic trade flows between AEC countries and
expected to spur economic growth in the region compared to previous periods. Higher economic
growth is hoped to bring about positive impacts on the growth of cement demand to support physical
development activities across the region. Several infrastructure projects aim to connect centres of
growth in the region and are expected to be realized
DISTRIBUTION NETWORK AND RAW MATERIALS – KEYS TO SUCCESSFUL CEMENT BUSINESS
Cement products, once packaged, have considerable weight and cannot be stored in a long period as cement will harden, which means cement needs to be produced in quantity that accurately corresponds with demand. Having
specific purpose of use, i.e. to support physical infrastructure projects such as houses, roads, bridges, or office and residential buildings, cement plants need to be located at relatively close distances with cities big and small.
Cement factories also require specific raw materials, limestone and clay. Cement production today uses “dry method”, in which the mixture of limestone, clay, and other substances are heated into slag and grinded by
mixing other material into cement. Therefore, cement plants in general are established nearby limestone formation, typically located nearby coastal area, which will also allow for availability of clay.
Due to the nature of the product, i.e. has no shelf life and can only be used for physical construction activities, cement products need to be transported from the plant and marketed within an accurate time span and within
appropriate quantity to meet demands. Considering these requirements, the proficiency in distribution of products is crucial in this business. Transportation costs also follow the distance of targeted market. To this end, all cement
companies must have reliable distribution network that will enable products to reach end-users efficiently. To establish distribution network and ensure that cement delivery to consumers is done in efficient and effective
manner, all players in the cement industry including the Company need to actively build its distribution network, choosing freight transport methods using railway or owned truck fleet, or cooperate with a third party. Part of this
distribution network is warehouse or packing plant equipped with dedicated port. In order to develop a reliable distribution network, since the last several years the Company has been actively
building packing plants in several potential areas. The Company believes that the presence of additional packing plants will bring more benefits to customers and the Company.
in the short term in order to boost national demand for cement in the region.
Economy of several ASEAN countries, such as Indonesia, Vietnam, Malaysia, the Philippines, and
Thailand are believed to have the prerequisites for rapid growth, as these countries are rich in natural
resources and human capital. Taking into account the trend of cement consumption in several ASEAN
countries, cement is projected to experience swift growth in line with economic developments. This will
in turn affect cement consumption in the regional market, which is predicted to improve in the next
several years
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Management Discussion and Analysis
