Indonesian Government Takes Multiple Measures to Deal with Cement Overcapacity

Indonesian Ministry of Industry officials said recently that the government will implement a suspension policy or new investment arrangements in the cement industry to cope with the overcapacity situation in the national cement industry, hoping to provide a legal basis for the development of the cement industry and improve the competitiveness of the industry. According to the data released by the government, almost all regions except Bali-Nusa Tenggara and Maluku-Papua provinces have experienced overcapacity in the cement industry, with the largest proportion of overcapacity in Java, exceeding 55.4%. New investment in the

cement industry will continue to be targeted at Papua, West Papua, Maluku and North Maluku until the national average utilization rate reaches 85%. In the first half of 2023, the cement output was 29.3 million tons, while the national cement demand reached 28 million tons; in 2022, the annual cement output exceeded 64 million tons, and the demand was about 63 million tons. At present, there are 15 comprehensive cement companies in China, with a total installed capacity of 116 million tons per year, and the overcapacity level is still 51.8 million tons, with an overcapacity rate of 45%.   

The government hopes to cope with overcapacity by increasing exports, with total cement and clinker exports rising 11.57% year-on-year in the first half of 2023, which is also in line with the growing demand in foreign markets. Since December 2020, the rise in international coal prices has also had a significant impact on the cement industry, not only resulting in increased production costs, but also hindering the supply of coal in the cement industry. Coal is the main raw material and fuel for the cement industry, accounting for up to 40% of the production cost structure. In order to cope with the soaring price of coal, the government is currently drafting coal-related regulations.