Semen Indonesia Expands to Aceh

semen-indonesiaFollowing its plan to build a cement factory in Papua, state-run company Semen Indonesia said it will soon expand to the west and develop another cement plant in Aceh to fulfill increasing demand in the province.

Semen Indonesia finance director Ahyanizzam said the company was considering developing a cement factory in Aceh, as well as in Sulawesi and Kalimantan, in addition to its plan to set up a plant in Papua.

Each of the plants, according to him, will have the capacity to produce up to 3 million tons of cement a year — similar to the company’s under construction Indarung VI plant in Padang, West Sumatra, and its greenfield project in Rembang, Central Java.

The investment needed for the plants will match those of Indarung VI, which costs the company US$352 million.

Ahyanizzam said the company would source funds needed for the plants from bank loans.

He added that his company was currently looking for suitable locations for the plants.

“We expect to start working on the Aceh project next year,” he said.

According to him, the company opted to build its next plant in Aceh to cater to rising cement demand on account of the construction of the Trans Sumatra highway.

The Trans Sumatra highway is a 2,700-kilometer toll road project stretching from Aceh to Lampung in 24 sections, connecting major cities in Sumatra.

Four sections of the toll road began construction earlier this month and are expected to be completed in 16 months, absorbing around Rp 47 trillion (US$4.06 billion) in investment.

The four sections are designed to connect Medan to Binjai in North Sumatra, Pekanbaru to Dumai in Riau, Bakauheni to Bandar Lampung in Lampung and Palembang to Indralaya in South Sumatra.

Ahyanizzam added that the planned cement plants were also projected to help Semen Indonesia cope with rising cement demand from across the country.

The company recently earmarked around Rp 4 trillion each year to establish new plants to meet rising demand, which is expected to increase by around 4 percent this year and around 6 percent next year.

The publicly listed company announced last month a plan to build a factory in Papua, which will be the first in the region, also to meet rising demand from infrastructure projects there and to cut transportation costs to transport cement from Gresik, East Java, and from South Sulawesi.

Semen Indonesia — through its Sulawesi-based subsidiary Semen Tonasa — is reportedly allocating Rp 3 trillion for the construction of the plant, which will be equipped with a private seaport to support

The Papua plant will have a capacity to produce around one million tons of cement a year. It is scheduled for construction early next year.

Semen Indonesia produces 31.8 million tons per year and dominates 44 percent of the country’s cement market.

The company plans to boost its cement production to 39.3 million tons by 2016 and to 40.8 million tons by 2017 — with the help of its Indarung VI, Rembang and Vietnamese plants.

Construction of the Indarung VI and Rembang plants began earlier this year and is estimated to start commercial operations in 2017 at the latest.

The firm also plans to spend $300 million to establish a new plant in Vietnam next year to expand the production capacity of its Vietnamese subsidiary, Thang Long Cement Company, by establishing a new plant with a total production capacity of 1.5 million tons of cement per year.

//Anggi M. Lubis, The Jakara Post