Overview of Indonesia's Cement Industry
The cement industry is one of the strategic sectors in Indonesia’s economy, playing a crucial role in supporting infrastructure development and urban expansion. Cement serves as a primary raw material in the construction of roads, bridges, buildings, dams, and various other national strategic projects, making it a key indicator of real sector activity. With a population of over 270 million and the ongoing acceleration of development outside Java Island, the demand for building materials such as cement is expected to remain strong in the long term.
Based on the growth, cement industry production capacities from 2020 to 2024 highlighting both installed capacities and actual production (in tons). Throughout this five-year period, installed capacities steadily increased from approximately 112.5 million tons in 2020 to 119.5 million tons in 2024, reflecting continued investment in production infrastructure. However, actual production volumes show a downward trend from 78.8 million tons in 2020 to a low of 66.4 million tons in 2022, followed by a modest recovery to 67.8 million tons in 2024. This widening gap between installed and actual capacities suggests consistent underutilization, indicating challenges such as operational inefficiencies, supply chain disruptions, reduced market demand, or regulatory constraints. The data implies that while the industry is expanding in terms of capacity, it is not translating into proportional output growth highlighting a critical area for strategic review in production optimization and market alignment.
The sales performance of the cement industry from 2020 to 2024, with a projection for 2025, indicates a modest but steady overall growth trajectory, primarily driven by increasing export demand. Total sales volume rose from 71.8 million tons in 2020 to 76.8 million tons in 2024 and is projected to reach approximately 76.87 million tons in 2025. While domestic sales have remained relatively stable, rising from 62.5 million tons in 2020 to a projected 64.8 million tons in 2025, their contribution to growth has been limited. In contrast, export sales have shown consistent upward momentum, growing from 9.3 million tons in 2020 to an estimated 12.07 million tons in 2025.
This trend suggests that the industry's growth potential is increasingly tied to international market opportunities rather than domestic consumption. The relatively flat domestic sales imply possible market saturation or slower infrastructure development, whereas the rising export figures reflect strong regional demand and competitive positioning abroad. These insights underscore the importance for industry players to diversify market reach, strengthen international partnerships, and innovate in product offerings to sustain long-term growth.
Production Overcapacity and Industry Efficiency
In recent years, the national cement production capacity has steadily increased, reaching approximately 120 million tons per year by 2024. However, domestic demand has shown a declining trend, falling from 69.5 million tons in 2018 to 64.9 million tons in 2024. As a result, plant utilization rates have dropped significantly from around 65% before the pandemic to only 56% in 2024.
This imbalance is driven by slower economic growth, subdued construction activity, and increased competition, including imports of cheaper cement products. The resulting surplus supply has led to downward pressure on prices, squeezing profit margins and causing inventory build-up, which raises storage costs and operational inefficiencies. Overcapacity also risks workforce reductions and plant closures, dampening future investments. To address these challenges over the next three years, industry consolidation through mergers and acquisitions can help optimize production levels. Diversifying product offerings and expanding into export markets could open new revenue streams. Additionally, technological advancements to improve production efficiency and government support via regulation and infrastructure investment are critical to restoring market balance and sustainable profitability in the sector.
Lilik Unggul Raharjo, Chairman of the Indonesian Cement Association (ASI), recommends implementing a moratorium on new plant construction to prevent further excess capacity and maintain market balance.
Consumption and Trade Trends
Domestic cement consumption has remained relatively stagnant, ranging between 63 to 65 million tons during the 2020 - 2024 period. This indicates that domestic demand has not grown fast enough to absorb the industry's increasing production capacity. Meanwhile, cement exports have shown a steady rise, from 9.3 million tons in 2020 to 11.9 million tons in 2024. Exports have become a vital channel for absorbing the oversupply, particularly targeting markets in South Asia and Africa.
The Director General of the Chemical, Pharmaceutical, and Textile Industries at the Ministry of Industry stated that the government is actively promoting cement exports as one of the key solutions to sustain domestic industry performance amid stagnant local demand.
Related to Construction Sector Growth
Based on the growth data of the construction sector and cement industry sales, there is a strong correlation between the two, as cement serves as a primary raw material in construction projects. Since 2020, the construction sector has shown a significant rebound, rising from -3.4% to 2.9% in 2021, and continuing a positive trend, reaching approximately 7% by 2024. However, this growth has not been matched by a significant increase in domestic cement sales, which remains stagnant at around 62 to 65 million tons per year. This stagnation may indicate increased efficiency in material usage, the adoption of new construction methods, and delays in large-scale projects. On the other hand, cement exports have shown a positive trend, increasing from 9.3 million tons in 2020 to over 12 million tons by 2025. This reflects a strategic shift among cement producers to expand into international markets in response to domestic market stagnation and national overcapacity.
The cement industry’s outlook over the next three years appears promising, particularly with large-scale infrastructure initiatives such as the development of the new national capital (IKN) and industrial zones. However, the realization of this growth will largely depend on government policy, smooth project financing, and the stability of energy and raw material prices. Indonesia’s installed cement production capacity in 2024 is estimated to exceed 115 million tons, while national consumption stands at only around 65 million tons, indicating overcapacity of more than 40%. This situation compresses profit margins and intensifies price competition among major producers, making operational efficiency and export strategies critical to sustaining business performance.
According to desk research from reliable sources such as the Indonesian Cement Association (ASI), domestic cement consumption is projected to grow at a modest rate of only 1 - 3% annually through 2026. Indonesia's primary cement export destinations include Bangladesh, Sri Lanka, the Philippines, and Australia, indicating that foreign markets are a key strategy for absorbing the excess domestic production capacity. Therefore, although the construction sector shows a positive trend, domestic cement demand remains relatively weak. The future success of the cement industry will heavily depend on the synergy between the realization of national infrastructure projects and sustained expansion into international markets.
Opportunities and Challenges
Opportunities
· Sustainable infrastructure development: National strategic projects such as the new capital city (Ibu Kota Nusantara/IKN), construction of toll roads, seaports, and dams are generating significant demand for building materials, including cement. The estimated cement requirement for IKN alone is projected to exceed 10 million tons over the course of its multi-year construction. The Ministry of Public Works and Housing (PUPR) has stated that the supply of building materials, including cement, will be heavily absorbed during the 2024 - 2026 development period.
· Growing export markets: Countries such as Bangladesh, Sri Lanka, and several regions in East Africa have become key export targets due to their limited domestic production capacity. With an oversupply of cement, Indonesian producers have the opportunity to expand their market share in these regions.
· Green cement trend: Global demands for sustainability are driving the development of environmentally friendly cement (low-carbon cement). This presents an opportunity for producers to differentiate their products and attract investors as well as ESG (Environmental, Social, and Governance)-oriented projects.
Challenges
· Structural overcapacity: A significant imbalance between production capacity (119 million tons) and actual consumption (around 65 million tons) has created a permanent oversupply. This results in unhealthy competition and selling prices below production costs.
· Dependence on government projects: The private property sector has not fully recovered since the pandemic, making cement demand heavily reliant on the progress of government infrastructure projects. Delays or postponements in these projects will directly impact cement producers.
· Energy and raw material costs: Cement production heavily depends on fuels such as coal and electricity. The recent global increase in energy commodity prices has significantly impacted producers’ cost structures.
· Market fragmentation: The large number of players in the industry, including small-scale plants, creates price pressure and hinders consolidation efforts. This limits overall industry efficiency.
Based on these factors, the Indonesian cement industry is currently facing significant pressure due to structural overcapacity and stagnant domestic demand. Dependence on government projects, market fragmentation, and high energy costs further exacerbate the situation. On the other hand, opportunities remain available through exports, large-scale projects such as IKN, and innovation in environmentally friendly products.
Based on the growth, cement industry production capacities from 2020 to 2024 highlighting both installed capacities and actual production (in tons). Throughout this five-year period, installed capacities steadily increased from approximately 112.5 million tons in 2020 to 119.5 million tons in 2024, reflecting continued investment in production infrastructure. However, actual production volumes show a downward trend from 78.8 million tons in 2020 to a low of 66.4 million tons in 2022, followed by a modest recovery to 67.8 million tons in 2024. This widening gap between installed and actual capacities suggests consistent underutilization, indicating challenges such as operational inefficiencies, supply chain disruptions, reduced market demand, or regulatory constraints. The data implies that while the industry is expanding in terms of capacity, it is not translating into proportional output growth highlighting a critical area for strategic review in production optimization and market alignment.
The sales performance of the cement industry from 2020 to 2024, with a projection for 2025, indicates a modest but steady overall growth trajectory, primarily driven by increasing export demand. Total sales volume rose from 71.8 million tons in 2020 to 76.8 million tons in 2024 and is projected to reach approximately 76.87 million tons in 2025. While domestic sales have remained relatively stable, rising from 62.5 million tons in 2020 to a projected 64.8 million tons in 2025, their contribution to growth has been limited. In contrast, export sales have shown consistent upward momentum, growing from 9.3 million tons in 2020 to an estimated 12.07 million tons in 2025.
This trend suggests that the industry's growth potential is increasingly tied to international market opportunities rather than domestic consumption. The relatively flat domestic sales imply possible market saturation or slower infrastructure development, whereas the rising export figures reflect strong regional demand and competitive positioning abroad. These insights underscore the importance for industry players to diversify market reach, strengthen international partnerships, and innovate in product offerings to sustain long-term growth.
Production Overcapacity and Industry Efficiency
In recent years, the national cement production capacity has steadily increased, reaching approximately 120 million tons per year by 2024. However, domestic demand has shown a declining trend, falling from 69.5 million tons in 2018 to 64.9 million tons in 2024. As a result, plant utilization rates have dropped significantly from around 65% before the pandemic to only 56% in 2024.
This imbalance is driven by slower economic growth, subdued construction activity, and increased competition, including imports of cheaper cement products. The resulting surplus supply has led to downward pressure on prices, squeezing profit margins and causing inventory build-up, which raises storage costs and operational inefficiencies. Overcapacity also risks workforce reductions and plant closures, dampening future investments. To address these challenges over the next three years, industry consolidation through mergers and acquisitions can help optimize production levels. Diversifying product offerings and expanding into export markets could open new revenue streams. Additionally, technological advancements to improve production efficiency and government support via regulation and infrastructure investment are critical to restoring market balance and sustainable profitability in the sector.
Lilik Unggul Raharjo, Chairman of the Indonesian Cement Association (ASI), recommends implementing a moratorium on new plant construction to prevent further excess capacity and maintain market balance.
Consumption and Trade Trends
Domestic cement consumption has remained relatively stagnant, ranging between 63 to 65 million tons during the 2020 - 2024 period. This indicates that domestic demand has not grown fast enough to absorb the industry's increasing production capacity. Meanwhile, cement exports have shown a steady rise, from 9.3 million tons in 2020 to 11.9 million tons in 2024. Exports have become a vital channel for absorbing the oversupply, particularly targeting markets in South Asia and Africa.
The Director General of the Chemical, Pharmaceutical, and Textile Industries at the Ministry of Industry stated that the government is actively promoting cement exports as one of the key solutions to sustain domestic industry performance amid stagnant local demand.
Related to Construction Sector Growth
Based on the growth data of the construction sector and cement industry sales, there is a strong correlation between the two, as cement serves as a primary raw material in construction projects. Since 2020, the construction sector has shown a significant rebound, rising from -3.4% to 2.9% in 2021, and continuing a positive trend, reaching approximately 7% by 2024. However, this growth has not been matched by a significant increase in domestic cement sales, which remains stagnant at around 62 to 65 million tons per year. This stagnation may indicate increased efficiency in material usage, the adoption of new construction methods, and delays in large-scale projects. On the other hand, cement exports have shown a positive trend, increasing from 9.3 million tons in 2020 to over 12 million tons by 2025. This reflects a strategic shift among cement producers to expand into international markets in response to domestic market stagnation and national overcapacity.
The cement industry’s outlook over the next three years appears promising, particularly with large-scale infrastructure initiatives such as the development of the new national capital (IKN) and industrial zones. However, the realization of this growth will largely depend on government policy, smooth project financing, and the stability of energy and raw material prices. Indonesia’s installed cement production capacity in 2024 is estimated to exceed 115 million tons, while national consumption stands at only around 65 million tons, indicating overcapacity of more than 40%. This situation compresses profit margins and intensifies price competition among major producers, making operational efficiency and export strategies critical to sustaining business performance.
According to desk research from reliable sources such as the Indonesian Cement Association (ASI), domestic cement consumption is projected to grow at a modest rate of only 1 - 3% annually through 2026. Indonesia's primary cement export destinations include Bangladesh, Sri Lanka, the Philippines, and Australia, indicating that foreign markets are a key strategy for absorbing the excess domestic production capacity. Therefore, although the construction sector shows a positive trend, domestic cement demand remains relatively weak. The future success of the cement industry will heavily depend on the synergy between the realization of national infrastructure projects and sustained expansion into international markets.
Opportunities and Challenges
Opportunities
· Sustainable infrastructure development: National strategic projects such as the new capital city (Ibu Kota Nusantara/IKN), construction of toll roads, seaports, and dams are generating significant demand for building materials, including cement. The estimated cement requirement for IKN alone is projected to exceed 10 million tons over the course of its multi-year construction. The Ministry of Public Works and Housing (PUPR) has stated that the supply of building materials, including cement, will be heavily absorbed during the 2024 - 2026 development period.
· Growing export markets: Countries such as Bangladesh, Sri Lanka, and several regions in East Africa have become key export targets due to their limited domestic production capacity. With an oversupply of cement, Indonesian producers have the opportunity to expand their market share in these regions.
· Green cement trend: Global demands for sustainability are driving the development of environmentally friendly cement (low-carbon cement). This presents an opportunity for producers to differentiate their products and attract investors as well as ESG (Environmental, Social, and Governance)-oriented projects.
Challenges
· Structural overcapacity: A significant imbalance between production capacity (119 million tons) and actual consumption (around 65 million tons) has created a permanent oversupply. This results in unhealthy competition and selling prices below production costs.
· Dependence on government projects: The private property sector has not fully recovered since the pandemic, making cement demand heavily reliant on the progress of government infrastructure projects. Delays or postponements in these projects will directly impact cement producers.
· Energy and raw material costs: Cement production heavily depends on fuels such as coal and electricity. The recent global increase in energy commodity prices has significantly impacted producers’ cost structures.
· Market fragmentation: The large number of players in the industry, including small-scale plants, creates price pressure and hinders consolidation efforts. This limits overall industry efficiency.
Based on these factors, the Indonesian cement industry is currently facing significant pressure due to structural overcapacity and stagnant domestic demand. Dependence on government projects, market fragmentation, and high energy costs further exacerbate the situation. On the other hand, opportunities remain available through exports, large-scale projects such as IKN, and innovation in environmentally friendly products.
