Posted on 09 Sep 2016
Local steel-makers are unable to run their plants at full capacity because of cheaper Chinese steel imports amid a global glut.
Indonesia’s steel-making capacity amounts to 11 million tons per year while current production only stands at 7 million tons as it faces cheaper steel from China and other countries that are expanding their shipment destinations amid the ongoing global glut.
Global steel oversupply began in 2014 when capacity reached 2.32 billion tons, more than double the 1.06 billion ton capacity in 2000. It is expected to climb another 100 million tons to 2.42 billion tons in 2017 due to business expansions, especially in China and India, Organization for Economic Cooperation and Development (OECD) data show.
Indonesia Steel Forum chairman Singgih Wasesa said that to overcome the challenge, local firms should collaborate to face tight competition from abroad.
“We should have a collective spirit to cooperate with each other, not to compete. Our competition is now against steel importers,” he said in his opening speech at the Steelindonesia Expo 2016 in Kemayoran, Jakarta, on Wednesday. About 70 local steel manufacturers and processors are participating in the government-held event.
Previously, the Indonesian Iron and Steel Industry Association (IISIA) urged the government to provide more protection to the industry against importers, especially China, which has created worldwide tension with other major producing countries that have been hit by low metal prices for years.
Chinese exports worldwide have hit 112 million tons, 32 million tons of which are exported to ASEAN countries, with 7 million tons exported to Indonesia, IISIA pointed out.
Many Chinese producers add boron infusion in steel-making, hence receiving an up to 13 percent tax rebate from their government as well as zero import duty from Indonesia, making their products
cheaper.
Industry Ministry director general of metal, machinery, transportation equipment and electronic industries, I Gusti Putu Suryawirawan, said the ministry was preparing policies to face “import attacks”.
“We’re preparing a regulation to make sure imported steel still has local content to be able to get in here as well as adjustment in Indonesia National Standard [SNI] requirements for importers,” he said on the sidelines of the event.
The ministry is also mulling imposing anti-dumping import duties for hot rolled coil (HRC), cold rolled coil (CRC) and cold rolled stainless.
To increase demand for local steel firms, Suryawirawan emphasized that state enterprises and government institutions needed to truly walk the talk in using local products.
“State electricity company PLN and Upstream Oil and Gas Regulatory Special Task Force [SKKMigas] need to open up their plans to local firms and hold tenders on time so that the industry knows what kind of steel they need to prepare. Also, don’t change your specs suddenly to ones that locals aren’t able to produce,” he remarked.
Under Presidential Instruction No. 2/2009 on local product use in government projects, state institutions are required to use a certain proportion of local content, although the rule has met
challenges.
For steel firms to see their products used in projects, meanwhile, Putu reminded firms to register on the e-catalog so the government could detect their products.
The ministry projects national demand will hit 17.5 million tons this year, more than the national capacity of 11 million, so the remaining 10.5 million is expected from imports, which are preferred by local customers.
Vice president expert staff member Alwi Hamu acknowledged PLN’s and SKK Migas’ questionable commitment to using local products.
