Indocement Tunggal Prakarsa, the country’s biggest cement maker by value, plans to build a plant in Pati, Central Java, at a cost of around $300 million, reports said on Wednesday.
“Investment will be done in stages,’’ Sahat Panggabean, Indocement’s corporate secretary, was quoted as saying on Wednesday by Investor Daily, which is affiliated with the Jakarta Globe.
“The company will set aside around $100 million for its initial investment,’’ Sahat said.
The new plant is estimated to produce 2.5 million tons of cement annually. Construction is expected to start next year.
Sahat said that Indocement would finance the construction of the plant with its own cash, but if for some reason that would prove impossible, the company might resort to seeking external funding. Indocement had Rp 6.2 trillion ($700 million) in cash equivalents as of June 30.
Indocement’s expansion would mean it follows in the footsteps of cement makers such as Semen Gresik.
The nation’s growing economy and plans for large-scale infrastructure development — such as new roads and airports — is set to boost demand for cement.
Indocement previously said it wanted to produce 18.6 million tons of cement this year, but it was close to reaching that goal in the first six months alone. From January to June, the company’s total production was 17.6 million tons.
The company currently operates three cement plants.
The one in Citeureup, West Java, is the biggest with a total production of 11.9 million tons per year, followed by the plant in Cirebon, also in West Java, which produces 4.1 million tons per year. Indocement’s third plant is located in Tarjun, in South Kalimantan, and produces 2.6 million tons of cement per year.
The company’s biggest competitor, East Java-based Semen Gresik, has announced plans to increase annual cement production to 30 million tons by 2015, up from this year’s 20-million-ton estimate and last year’s 19.5-million-ton production.
Semen Gresik said earlier this year that it would build two new cement plants that would add 5 million tons a year to its total production capacity. The first plant, in Pangkep, South Sulawesi, is expected to be operational this year and another one, in Tuban, East Java, would be ready next year.
The government has presented ambitious plans to boost infrastructure development in an effort to reduce poverty and achieve a yearly economic growth target of 7 percent by 2014. It introduced the so-called Master Plan for the Acceleration and Expansion of Indonesian Economic Growth (MP3EI) earlier this year.
Shares of Indocement fell 0.4 percent to Rp 13,250 on the Indonesia Stock Exchange on Wednesday, while those of Semen Gresik fell 1.8 percent to Rp 8,250.