Posted on 06 May 2015
The government has decided to raise
import duties on foreign steel products to protect local steel producers from
cheaper imports.
The duties would be increased to between 15 percent and 40 percent, up from
between 0 percent and 5 percent at present.
The duty increase will affect all imports, except from countries that have a
preferential tariff arrangement, such as a free trade agreement, with
Indonesia.
The increase will put Indonesia’s levies relatively on par with its Southeast
Asian peers, including Malaysia and Thailand, which respectively charge 20
percent and 40 percent. “We expect the measure to serve as an initial step
toward helping local producers by providing them with a space to push up the
utilization of their manufacturing facilities,” the Industry Ministry’s base
manufacturing industry director general, Harjanto, said last week.
He added that the duty increase would be stipulated under a ministerial
regulation to be issued by the Finance Ministry immediately.
Like their fellows worldwide, local steel producers, including state-owned firm
Krakatau Steel, are presented with a more challenging situation, primarily
caused by excess global metal supply that has found its way into the home
market, either legally or illegally, pushing down prices.
With insignificant import duties in place, Indonesia is apparently an
easy target for foreign steel makers seeking new destinations to dump their
excess output. Local steelmakers have seen the utilization rate of their
production capacity plunge to 30 percent and 40 percent from about 70 percent
in past years, according to the Indonesian Iron and Steel Industry Association
(IISIA). Some companies have even shut down operations, inciting a fresh wave
of layoffs.
To cope with an abundant steel supply at home, the nation’s biggest steelmaker,
Krakatau Steel, for instance, has pushed down its steel price to the low market
price of between US$380 and $390 per ton, far below its production cost, which
can hit $600 per ton.
The higher import duties would be applied temporarily and be subject to review
after two to three years, Harjanto further said.
The Industry Ministry would also encourage ministries, public institutions and
state-owned companies that used state funds in their procurement to use
domestically made steel as the next step to allow the steel industry thrive, he
added.
IISIA executive director Hidayat Triseputro welcomed the government’s move to
impose higher import duties to support struggling domestic manufacturers that
have had to deal with allegedly unfair trade practices carried out by overseas
steelmakers.
However, he warned that the higher levies might also pose a new risk either by
way of illegal inbound shipments or manipulated steel categories subject to
lower import duties.
“The government has to ensure tighter supervision over imports. If it cannot
control irregular imports, the market will be further distorted with foreign
steel products and make the situation worse,” Hidayat said in a text message.
Krakatau Steel recently called on the government to immediately impose higher
fees on imported steel entering the country to save the domestic steel
industry. “We urge the government to soon raise import duties to around 20
percent for foreign-made steel to help local steelmakers offset a steel-price
slump and unfair competition from foreign sellers,” Krakatau Steel independent
commissioner Roy E. Maningkas said recently.
