THE GROWTH OF THE CONSTRUCTION SECTOR AND CEMENT AND STEEL PRODUCTION IN 2022
DEVELOPMENT OF THE NATIONAL CONSTRUCTION SECTOR
Based on data from Statistics Indonesia (BPS), growth in the construction sector until the end of Q3/2021 was much better than 2020. Based on its movement, VISI predicts that Q4/2021 will experience a positive growth of 4.26%. And growth in 2021 in the range of 2.93% when compared to the previous year. Indeed, the value has not been able to compensate for the conditions before the pandemic, but in terms of growth, there have been positive signals. Thus, the construction sector is also predicted to record positive growth of 6.18% in 2022.
The data for 2021 has shown some signs of recovery, though not as big as one might have hoped. However, industrial conditions in 2021 are still very volatile because the pandemic has not been fully controlled.
Along with hopes for the recovery of Indonesia’s infrastructure sector in 2022, the number of Covid-19 infections has soared in recent months and regional restrictions are still a barrier.
In addition, no matter how good the potential of the construction sector in the future, as long as the construction market is mostly controlled by SOEs, small and medium-sized companies will continue to struggle to develop.
CONSTRUCTION COMPANIES INCORPORATED IN THE NATIONAL CONSTRUCTION EXECUTER ASSOCIATION INDONESIA (GAPENSI) BASED ON COMPANY CLASSIFICATION
The Covid-19 pandemic that emerged in early 2020 dealt a major blow amid the unfavorable condition of the construction sector. Because of this, many players in the sector have experienced a decline in performance and construction project acquisitions.
Based on the data from National Construction Executer Association Indonesia (Gapensi), in 2021, there was a decrease in the number of construction companies by 6,859 companies or about 26% of the number of companies in 2020. The largest decrease occurred in companies with a K1 work classification (Companies with capital ranging from IDR 50 million to IDR 500 million and a limit value per project maximum of IDR 300 million) which is 3,917 companies or about 57% of the total decrease. There are various reasons for the decrease, such as the company temporarily closed, permanently closed, went bankrupt, and other problems.
NATIONAL CEMENT INDUSTRY
The annual national cement production capacity in Indonesia continues to increase even amid the Covid-19 pandemic. Based on data obtained from various sources, cement production capacity increased by 3.44% or increased by 3.83 million tons/year. Even in 2021, the production capacity increased again to 116 million tons/year. The increase was based on the optimization of factories from several Indonesian cement producers.
However, this has become a chronic problem in the cement industry sector, where annual consumption cannot keep up with the increase in production capacity. Based on its growth, in 2020, there was a decrease in cement consumption by 5.68% or as much as 4.32 million tons. The increase in production capacity when national consumption decreased due to the pandemic caused the already large excess supply of cement (oversupply) to become even greater. Fortunately, in 2021 its development is offset by growth in national consumption, which is much larger than its production volume or 3.95 million tons. The increase in consumption came from the increase in domestic cement consumption.
Over Supply of National Cement Products
In 2021, there were 40.27 million tons of oversupply of cement produced in Indonesia. This excess decreased by 7.5% or 3.25 million tons.
Based on CNBC Indonesia, oversupply in the cement industry is estimated to continue at least until 2030. This makes the condition of the cement industry not conducive, where many cement products are not absorbed by the market. This is also exacerbated by the issuance of new cement factory permits in East Kalimantan, which makes the market currently occupied by 15 cement producers have to be divided again with new players. Although, new players have the commitment of not selling most of the cement production locally.
In an interview with CNBC Indonesia TV, Chairman of the Indonesian Cement Association, Widodo Santoso, explained that several problems in the domestic cement industry would have an impact on the sustainability of the cement industry in the country if not addressed.
(Source: CNBC Indonesia)
By looking at its development, the industry projection in 2025 will still be oversupply of 27 – 30 million tons. Assuming consumption growth is 4% annually, so that the manufacturer’s utilization rate is still in the range of 76%.
National Cement Sales in 2021
Based on the development of sales, in 2021, there was an increase in domestic sales by 5.9% or to 66.21 million tons and exports by 2.6% to 9.52 million tons. The volume is predicted to continue to increase in line with improving economic conditions during the pandemic.
With the return of government projects to support the development of the country’s infrastructure, sales of building materials, especially cement, are expected to soar, and optimism for cement companies in Indonesia remains positive.
NATIONAL STEEL INDUSTRY
A number of steel issuers remain optimistic in 2021, believing that their business could improve in line with the recovery of the national economy. This is based on the prospect of industries that are consumers of steel products such as automotive, shipping, construction, manufacturing, which in 2021 have started to recover and most of them have resumed operations.
On the other hand, Worldsteel released its short-term forecast for October 2021 for 2021 and 2022. World steel demand could grow by 4.5% in 2021 or by 1,885.4 Mt, after growing 0.1% in 2020. In 2022, world steel demand is expected to continue to rise by 2.2% to 1,896.4 MT. This estimate is based on the assumption that vaccinations are widespread throughout the world and that the new Covid-19 variant does not have a more damaging impact than previous variants.
The recovery in steel demand in 2021 is faster than previously thought. Based on this fact, Worldsteel expects steel demand worldwide to recover as it was before the pandemic, except in China. (Source: https://www.iisia.or.id/)
In 2021, the stock of steel in Indonesia was 18.29 million tons, while for its own consumption it was 15.20 million tons. There was another decrease in productivity when compared to the previous year and an increase in steel consumption of less than 1% due to the impact of the Covid-19 pandemic. Steel stocks in Indonesia are not fully produced in Indonesia, but are imported from overseas.
Based on data from various sources, in 2021, Indonesia imported up to 5.79 million tons of steel. Again, it increases and continues to compete with local products in the domestic market. This is also an obstacle for the domestic steel industry where most of its potential market is taken by imported products.
National Steel Sales in 2021
In sales of steel products, it was noted that there was an increase in sales of less than 1% to 15.20 million tons in 2021. The details of these sales were 8.29 million tons for the domestic market and 6.91 million tons for export to some countries (45.46% of total sales).
