France’s Lafarge SA, the world’s largest cement producer, reaffirmed its commitment to building a cement plant in Langkat, North Sumatra, with an investment of up to Rp 5 trillion (US$585 million), a minister says.

Industry Minister M.S. Hidayat said Sunday that Lafarge was currently finalizing a feasibility study for the project and exploring sources of raw materials in the area, while also designing an environmental impact analysis to be submitted to the Environment Ministry.

“If all runs well and Lafarge can get an investment permit from the BKPM [Investment Coordinating Board] at the end of this year, construction of the plant will start at the beginning of next year,” Hidayat told The Jakarta Post via telephone.

Cementing investment: A worker wraps up a stack of cement sacks to be loaded onto a ship at Sunda Kelapa Port,North Jakarta, in this photo taken on Feb. 16, 2010. Surging domestic demand for cement has encouraged global investors to set up plants in the country, including French cement maker Lafarge SA, which plans an investment of up to Rp 5 trillion (US$585 million) to build a plant in Langkat, North Sumatra. JP/Ricky Yudhistira

The construction of the plant, which has a planned capacity to produce 1.5 million tons of cement per year, would be in line with the government’s efforts to shift investment away from Java to other islands and support the country’s new economic master plan, he added.

Hidayat said he had asked Lafarge to allocate most of its production for the domestic market with possible exports to neighboring countries when local needs had been fulfilled.

He said that apart from the Langkat plant, Lafarge was eyeing the possibility of setting up another plant in East Java.

The French firm had initiated early moves, including discussions with state cement producer PT Semen Gresik, Hidayat said.

Earlier this year, Lafarge began operations at its new cement plant in Lhok Nga, Aceh, with a production capacity of 1.6 million tons per year, which replaced a plant damaged by the 2004 tsunami. The construction project, which began in 2007, cost $300 million.

Lafarge is the world’s leading producer of building materials including cement, construction aggregates, concrete and gypsum wallboard.

Employing 76,000 workers in 78 countries, the firm booked ¤3.56 billion ($5.17 billion) in sales during the first quarter of this year, up 9 percent from ¤3.28 billion over the same period last year.

The firm’s investment plan was reaffirmed following a visit by a business delegation led by French Prime Minister François Fillon, which pledged a total investment of $10 billion in Southeast Asia’s largest economy.

The Industry Ministry estimates that domestic cement consumption would grow by between 7 percent and 10 percent annually, with demand expected to reach 55 million tons by 2015 and break 100 million tons in 2020.

The Indonesian Cement Association (ASI) estimates that total cement production this year would increase 4.97 percent to 43 million tons from 41 million tons last year, in line with surging domestic cement consumption of 6 percent to 42.4 million tons this year from 40 million tons last year.

The increased domestic demand for cement has led to a number of global cement producers pouring investments into Indonesia.

Chinese firm Anhui Conch Cement Company Ltd. expressed its commitment last week to building four cement plants in East Kalimantan, West Kalimantan, South Kalimantan and West Papua, with an overall investment of
$2.35 billion.