Jakarta, CNBC Indonesia – The skyrocketing coal prices have made it difficult for the cement industry. Moreover, currently coal entrepreneurs prefer to export their products rather than selling them domestically. This makes the supply of coal for factories also getting thinner.
Chairman of the Indonesian Cement Association, Widodo Santoso, said that the supply of coal for the cement industry is running low, so many manufacturers are shutting down their operations.
He explained that at least the supply of coal for cement factories only lasts up to 10 days. Prior to this coal shortage, cement manufacturers could secure stocks for up to 30 days.
“Supply is extremely tight, so many of our members have shut down factories, for example one has shut down four factories, one has five factories turned off two,” he told CNBC Indonesia, quoted Monday (10/25/2021).
“They’re scared because supply in a critical country,” he continued.
Widodo asked the government to implement a Domestic Market Obligation (DMO) for coal for the cement industry in order to meet domestic needs. This has also been submitted to the Ministry of Industry.
According to him, DMO is very much needed because cement consumption in the fourth quarter of 2021 saw a big spike due to the completion of government projects.
“So please don’t export (coal) first before it’s safe domestically, because at least demandin Q4 it rose 15%,” he said.
According to Widodo, the increase in global coal prices has tripled until September, exceeding US$ 200 per ton. As a result, the price of coal for the cement industry has also soared.
The purchase price of coal in the cement industry before the end of 2020 ranged from Rp. 550 – 600 thousand per ton, now it has increased to Rp. 1.1 – 1.2 million per ton.
This makes the fuel cost of cement manufacturers soar by 30%, so the cost of cement production also increases by 25%-30%. As a result, cement prices in the market are also certain to increase.
“There will be a spike in cement prices, if the price doesn’t increase, it will collapse (fall),” he explained.