Semen Tonasa to build Rp 3t Plant in Sorong City

JAKARTA - Cement manufacturer PT Semen Tonasa, a subsidiary of state-run publicly listed cement giant PT Semen Indonesia, is planning to build its first factory in West Papua, as the company seeks to meet increasing demand in the region and at the same time cut distribution costs to the nation’s eastern areas.

Semen Tonasa president director Andi Unggul Attas said the company would be investing Rp 3 trillion (US$246.3 million) in the construction of the plant, named “Unit VI”, as well as its private seaport to support distribution, which will be located in Sorong, West Papua.

Currently, the company’s fifth plant in Pangkep, South Sulawesi, and its sister company, PT Semen Gresik’s plant in Gresik, East Java, are helping their parent company to supply cement to the Papua and West Papuan markets.

Demand for cement has increased by 6 percent each year in the eastern part of the country, especially in Papua and West Papua, where distributors charge Rp 1.6 million for each sack of cement, according to Andi.

In order to meet the provinces’ demand, the company was running four of its five plants at production capacity of 5.98 million tons per year, with 6.7 million tons its target for the end of this year, he added.

“We expect to reach the target, as we had already produced 4.2 million tons of cement by the end of August,” Andi said.

Andi explained that distribution by air was the cause of cement being so expensive in Indonesia easternmost provinces, adding that demand in the region was rarely met, even though the company had established 10 packing plants in several cities in the eastern half of the country.

“The high price of cement [in eastern Indonesia] is because all cement must be delivered by air. Even if cement could be delivered by sea, vessels are
reluctant to ship cement. This high distribution cost really affects [the company’s finances],” he added.

Therefore, the private seaport, which is to be developed together with Semen Tonasa’s first ever
Papua plant, is also expected to tackle distribution costs and issues in supplying the eastern part of the country.

As demand increased, he said, the company planned to raise its current 45 percent market share in eastern Indonesia to 50 percent, which could increase its revenue to Rp 5.3 trillion by the end of the year, up from Rp 4.8 trillion in 2013.

Andi said the company aimed to reap Rp 1.6 trillion in next year’s earnings before interest, taxes, depreciation and amortization (EBITDA), an increase from the expected Rp 1.4 trillion by the end of this year, which represents a 75 percent increase from its earnings of Rp 800 billion in 2010.

Plant will be firm’s first in Papua with private seaport also in the pipeline. Because demand increasing in Papua, but costs are high due to distribution by air

Meanwhile, three Asian cement manufacturers – Thailand’s Siam Cement Group, China’s Anhui, and Vietnam’s Chinfon Cement Corporation – are planning to build cement factories in Indonesia.

The Siam Cement Group is currently building a Rp 34 trillion plant, which will have a production capacity of 55 million tons of cement per year, while Anhui is preparing to build a 3-million ton capacity plant worth $500 million.

Chinfon is currently constructing a 4-million ton capacity plant worth $600 million on 500 hectares of land in Banten. Chinfon is the parent company of PT Cemindo Gemilang, which produces Merah Putih, a local cement brand.

Semen Tonasa’s new plant in Papua is also expected to strengthen the company’s grip in the region ahead of the ASEAN Economic Community in 2015 that will create a single market in Southeast Asia and thus increase competition in the region. [TJP]
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