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Possible new cement plant for Papua
State-run cement producer PT Semen Indonesia is assessing the possibility of building a plant in Papua in a bid to supply the market in the countryâs easternmost province
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tate-run cement producer PT Semen Indonesia is assessing the possibility of building a plant in Papua in a bid to supply the market in the country's easternmost province.
Semen Indonesia president director Dwi Soetjipto said the location of the production facility would be either in Jayapura or Manokwari, the two largest cities in proximity to a limestone quarry.
'We hope the study can conclude soon so that we can include the investment needed for the plant in our next year's capex [capital expenditure] budget. It might take around three years to construct the facility before it can commence commercial operations,' he explained.
Dwi said the plant was expected to have an output of around 600,000 tons in its initial development, and might need an investment of around US$200 to $250 per ton.
The investment needed to develop the plant was higher compared to the company's usual greenfield projects, which usually stand at around $150 to $200 per ton, because the company needed to source materials for the construction from outside the region, he said.
The company believes, however, the new plant will be a great opportunity to meet the growing need for cement for a number of infrastructure projects there.
'There is a serious need to develop infrastructure in Papua and we might see demand for building materials there to increase gradually. By establishing our own factory there, we hope to dominate at least 70 percent of the market in the region, as well as cutting the transportation costs needed to ship our products there.'
According to Semen Indonesia's estimates, Papua consumes around 600,000 tons of cement in a year, or 40 percent of the total eastern Indonesia cement consumption of 1.5 million tons per annum.
Semen Indonesia supplies around half of Papua's cement market. With the new factory, it is expected to increase its market share to around 70 percent.
The company has projected that cement demand in Papua will hit around 900,000 tons per annum around the time the company has finished its facility construction.
In its move to increase market share in the region, the company is competing with Indocement Tunggal Prakarsa and Semen Bosowa.
Currently the cement giant supplies the Papua market from its subsidiaries Semen Gresik in East Java and Semen Tonasa in South Sulawesi.
Dwi said that establishing a facility might also help his company reduce shipping costs.
Transportation costs accounted for around 11 percent of Semen Indonesia's total expenses, he explained.
Its location and difficult terrain had often caused difficulties in investing in Papua, Dwi said, but the region had seen more and more investment flowing in due to its promising and abundant natural resources.
Papua recorded 14.84 percent economic growth last year, the highest among all provinces, and West Papua came second with 9.3 percent growth. The two provinces surpassed the national economic growth of 5.7 percent.
To cater to the growing demand for cement in the Papua area, last year Semen Indonesia built a rotary packing plant in Sorong, West Papua with a total investment of Rp 162 billion ($13.8 million).
The plant produces 2,200 bags per hour and currently supplies between 300 and 400 tons per day in the West Papua area alone.
