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Ukraine crisis hits Indonesian cement, fertilizer industries
Semen Indonesia, Pupuk Indonesia struggle to source raw materials.
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A villager puts cement in a brick-making machine in Sanenrejo village, Jember regency, East Java on Feb. 15, 2021. Once home to dozens of illegal loggers, the villagers have shifted their attention to alternate sources of income, such as making concrete bricks or 'batako' that are sold at Rp 1,800 (US 13 cents) each. (JP/Wahyoe Boediwardhana)
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ussia's invasion of Ukraine has affected Indonesian cement and fertilizer producers with many firms in the two industries, which are among the bellwethers of the construction and agriculture sectors, facing difficulty securing certain raw materials.
State-owned cement producer PT Semen Indonesia Group (SIG) and state-owned fertilizer producer PT Pupuk Indonesia, the top companies in their respective industries, told lawmakers at a hearing on Tuesday that the industries were facing difficulty securing coal, kraft paper and a certain chemical used to make fertilizer due to the Ukraine war.
SIG CEO Donny Arsal said surging international coal prices meant coal miners preferred to export the commodity instead of selling it at domestic market obligation (DMO) prices. Thus, many cement producers were struggling to get hold of the fuel.
Indonesian benchmark coal prices (HBA) have surged to US$288.40 per ton in April after Western countries embargoed Russian coal. In comparison, the DMO policy pegs prices at $70 per ton. Most DMO coal goes to the electricity industry.
“The rest of the coal sold at DMO price [left after electricity demand] is up for grabs for cement, smelter and other players. If the supply is not enough, then some players might not get coal at DMO prices,” Donny told lawmakers of House Commission VII, which oversees industry and energy.
He urged the government to make a clear who-supplies-whom policy to ensure stability in the cement industry.
Read also: Indonesia mulls raising coal DMO to 30%
