Posted on 15 Mar 2016
Fitch said the Steel Pipe Industry of Indonesia (Spindo), a listed manufacturer of steel pipes and tubes controlling 30 percent of the market, would continue to benefit from a relatively stable operating profitability (EBITDA margin) and volume growth.
"Fitch believes that the excess capacity alone will not put meaningful pressure on domestic steel pipe prices because the gap between demand and production is not large," the ratings agency said in a statement on Monday (14/03).
The ratings agency said Spindo's sales are likely to grow by between 15 percent and 20 percent this year due to the economic recovery and capacity additions. The manufacturer's sales volume rose by 22 percent in January, compared to a year earlier.
The company's EBITDA margin remained stable in 2015 at about 14 percent, slightly higher than 13.8 percent in 2014 despite the average selling price falling by around 10 percent.
The ratings agency said the price pressure was likely to come from a combination of a prolonged decline in steel pipe prices and low-cost imports from China.
"Demand for the Indonesian steel sector will depend heavily on the pace of work on large government-led infrastructure projects across Indonesia," it said.
According to the Indonesian Iron and Steel Industry Association (IISIA), the national steel pipe production capacity reached 2.74 million tons in 2015 while demand is expected to remain at 2.57 million tons until 2020.
