Indonesia Cement recently announced its third quarter results, drawing our attention to Indonesia, one of the world's largest cement producers. As a leader in the local market, after the acquisition of Holcim Indonesia at the beginning of the year, Indonesia Cement's financial performance in 2019 has been positive so far. Analysts at Fitch pointed out that Indonesian Cement and its competitor Indocement achieved gross margin growth in the first half of 2019 as coal prices fell and cement sales prices rose. Sales,
however, reflect overcapacity at home and a shift to exports. In the first nine months of this year, domestic sales fell 2.05% year-on-year to 48.8 million tons. Cement and clinker exports rose 15.4% to 4.8 million tons, almost making up for the loss. This is a rapid growth, but it is slower than explosive growth of exports in 2018. Sales of Indonesian cement in Indonesia fell 4.9% to 18.7 million tons before the acquisition, which is lower than national average. Indonesia's Holcim Group is now selling Solusi Bangun, a new brand, which alleviates the situation to some extent. HeidelbergCement's Indocement is in a similar situation. So far, Indocement's sales and revenue have increased in 2019. In the first half of this year, its sales volume fell 2.3% year-on-year to 29.4 million tons.
Figure 1: Sales volume and export of Indonesian cement 2018-2109.01-09 (Unit: million tons) < br/> 
Source: Indonesian Cement
Geographically, data from the Indonesian Cement Association showed that in the first half of 2018, More than half of the country's sales (56%) come from Java. It was followed by Sumatra (22%), Sulawesi (8%), Kalimantan (also known as the Indonesian Borneo, 6%), Bali-Nusa Tenggara (6%) and Maluku-Papua (2%). From the perspective of cement type, bagged cement sales are dominant. In September 2019, it accounted for 74% of sales. The major cement producers have been keen to argue that the past 10 years have also seen an increase in bulk sales, as the bulk market share has increased.
Figure 2: Sales of cement in Indonesia from 2010 to 2019 (by type) < br/> 
Source: Indonesia Cement, Indonesia Cement Association
Previously, the main problem in the Indonesian market was overcapacity. This has been going on. According to the association's data, the utilization rate in 2018 was 70%, the output was 75.1 million tons, and the capacity was 110 million tons. This may be a major consideration in Rahau's decision to leave the country and Southeast Asia, with no end in sight for the short to medium term. At the end of 2018, it looked like the sale was in the process of being integrated. So far, so good. Maybe a second quarter turnaround will buy cement producers more time. Another notable aspect of the
Indonesian market is that it is one of the countries with a large cement industry and where Chinese companies have entered in a big way. After Holcim Indonesia was acquired, Conch Cement Indonesia became the third largest cement producer in Indonesia. Indonesia Cement and Indocement control 70% of the local capacity, at 51 million tons per year and 25.5 million tons per year, respectively.
Conch Cement Indonesia is the third largest cement producer with three integrated plants and a grinding station with a total capacity of 8.7 million tonnes. In a research report on the cement industry released in August 2019, Fitch pointed out that although Holcim Indonesia and Indocement have gained pricing power through leading market share, this position is being eroded by Chinese enterprises.
Indonesia has the honor of being the second largest cement producer in Southeast Asia, after Vietnam. China, the world's largest producer of cement, is not far behind. As seen above, this can be a mixed blessing for local producers as the market changes. The problem of overcapacity is serious, the withdrawal of a large multinational company has allowed a local company to consolidate the market, and China's influence is steadily growing. The Indonesian market is likely to be an example of the future development of other markets.
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