Semen Baturaja signs a five year deal to burn South Sumatra's landfill waste as cement kiln fuel

Indonesia's industrial decarbonization agenda advanced on a practical front this week. On 31 July 2026, PT Semen Baturaja (Persero) Tbk, known by its ticker SMBR, confirmed a memorandum of understanding with the Ogan Komering Ulu (OKU) Regency Government and PT Asiana Technologies Lestary to convert municipal waste from the Simpang Kandis landfill into refuse derived fuel, or RDF, for use in cement production. The agreement runs for five years and can be renewed by mutual consent.

An agreement built on a landfill in Ogan Komering Ulu

The planned RDF plant sits inside the Simpang Kandis landfill area in Gunung Meraksa village, Lubuk Batang district. Waste that would otherwise be buried is sorted, dried and shredded into a fuel with usable calorific value, then fed into the cement kiln in place of a share of coal. Suherman Yahya, President Director of Semen Baturaja, described the collaboration as more than a solution to the district's waste challenge, positioning it as part of a wider move to raise the company's use of alternative fuel and raw material, the industry term for which is AFR.

The structure of the arrangement matters as much as the technology. According to ANTARA, the OKU Regency Government is hosting the facility without allocating money from the regional budget and without paying a waste processing fee. The operator leases land at the landfill from the district, which turns a cost centre into a modest source of regional revenue.

This RDF technology is the right solution, because as well as reducing waste, the district also receives land lease income without operational costs from the regional budget.

Teddy Meilwansyah, Regent of Ogan Komering Ulu

The numbers behind the fuel switch

Semen Baturaja did not start from zero. Through the third quarter of 2025 the company used 120,989 tonnes of alternative fuel and raw material, roughly 22 percent above the 99,219 tonnes recorded in the same period of 2024. In the first half of 2025 alone the figure stood at 77,300 tonnes, an increase of about 33.5 percent year on year, driven largely by wider use of biomass such as sawdust and wood chips alongside industrial residues including spent bleaching earth and sludge oil.

Company disclosures also report a narrower measure. A corporate release covering full year 2024 cited 9,401 tonnes of AFR, up 41 percent from 6,661 tonnes in 2023, alongside a thermal substitution rate of 3.18 percent against a target of 2.63 percent. The two series are not directly comparable and the company has not published a reconciliation, so the smaller figure appears to capture a specific category of processed waste fuel rather than the total volume of alternative fuel and raw material. Readers should treat the 120,989 tonne figure and the 9,401 tonne figure as measuring different things.

Whichever measure is used, the direction is consistent, and the thermal substitution rate shows how much room remains. At 3.18 percent in 2024, Semen Baturaja sits well below its parent group. SIG, the state controlled cement holding company, lifted its thermal substitution rate to 9.77 percent in 2025 from 7.56 percent in 2024 and 7.27 percent in 2023. RDF from a dedicated municipal supply is precisely the input that closes that kind of gap.

Why cement kilns suit refuse derived fuel

Fuel accounts for 30 to 40 percent of cement production costs, a figure cited by Taufik, Director of Operations at Semen Baturaja, when the company discussed RDF with the Ministry of Environment in September 2025. That cost share explains why fuel substitution is one of the few decarbonization levers in heavy industry that improves the balance sheet at the same time as the emissions ledger.

Cement kilns also happen to be well suited to the task. They operate continuously at very high temperatures with long residence times, conditions that destroy organic contaminants and lock ash residues into the clinker rather than leaving a separate waste stream. That combination is why RDF co-processing has become standard practice in cement sectors across Europe and Japan, and why Indonesia's Ministry of Environment has been encouraging districts in South Sumatra to route sorted municipal waste toward kilns.

The utilization of this material not only contributes to reducing industrial waste and environmental impacts, but also increases energy efficiency in the cement production process.

Hari Liandu, Vice President of Corporate Secretary, Semen Baturaja

A regional supply chain, not a single plant

The Simpang Kandis agreement is one node in a larger mapping exercise. At the September 2025 session convened with the Ministry of Environment, attended by Edward Nixon Pakpahan, Director of Air Quality Protection and Management, and by environmental agencies from 12 districts and cities across South Sumatra, officials identified roughly 48 tonnes per day of RDF potential from OKU and OKU Timur alone. The 12 participating jurisdictions included Empat Lawang, Lahat, Muara Enim, Musi Banyuasin, Musi Rawas, Musi Rawas Utara, Ogan Ilir, Ogan Komering Ilir and PALI.

Semen Baturaja's Baturaja Plant II already operates an alternative fuel facility rated at 5 tonnes per hour. The constraint has never been kiln capacity. It has been securing a consistent, contractually anchored supply of fuel with predictable moisture content and calorific value, which is exactly what a five year agreement with a district government and a dedicated processing operator is designed to provide.

What the group scale tells us

The parent group offers a sense of what mature substitution delivers. SIG used 681,567 tonnes of alternative fuel in 2025, 24 percent more than the year before, displacing 467,000 tonnes of coal. The group reduced Scope 1 greenhouse gas intensity by 21 percent against its 2010 baseline and Scope 2 emissions by 15 percent against a 2019 baseline, and reported carbon intensity of 494 kg CO2 per tonne of PCC cement. It also received six Green PROPER awards from the Ministry of Environment in 2025.

For a mid sized producer such as Semen Baturaja, moving thermal substitution from roughly 3 percent toward group levels would displace tens of thousands of tonnes of coal annually while diverting an equivalent tonnage of waste from landfills that many South Sumatran districts are struggling to keep within permitted capacity.

Sirkularium's view

This agreement is a useful template for public institutions because it solves two problems with one asset. A district gains landfill diversion, regional revenue and no budget exposure. An industrial energy user gains a hedge against coal price volatility and measurable progress on emissions intensity. Neither outcome requires a subsidy.

For policy makers, three things are worth watching. First, feedstock quality: RDF only works when waste is segregated at source or mechanically sorted to a consistent specification, which makes district level waste sorting infrastructure the real determinant of success. Second, contract standardisation: a replicable model agreement covering land lease terms, tipping arrangements, calorific value specifications and offtake volumes would let other districts move quickly rather than negotiating from scratch. Third, measurement: thermal substitution rate is a clean, auditable indicator, and reporting it consistently across the national cement fleet would give the Ministry of Energy and Mineral Resources and the Ministry of Environment a shared scoreboard for industrial energy efficiency.

The next milestones to watch are the construction timeline for the Simpang Kandis facility, whether neighbouring districts formalise supply agreements to lift volumes beyond the 48 tonnes per day already mapped, and whether Semen Baturaja publishes an updated thermal substitution target for 2026 and 2027. Those figures will show whether this agreement becomes a regional supply chain or remains a single site pilot.