Monday, 6 January 2014


The Ministry of Industry [Kemenperin] reported that the steel industry still imported around 70% of total raw materials needed. Today the total need of Indonesia’s steel raw materials was posted at 6 – 7 tons, imported raw materials was around 4.2 – 4.9 million tons per year or equal to USD 3.9 billion nased on average price of steel raw materials around USD 800 million.

Of the total raw materials around 6.7 million tons, the total steel to be produced came to 9.9 tons. Data of Southeast Asia Iron & Steel Institute showed that total demand for steel product in Indonesia in 2011 came to 9.9 tons. Of that amount, around 54% was still imported. Today consumption of end result steel consumption at home was around 9 million tons of which 55% were imported.

However the Ministry of Industry was determined to reduce import of steel raw materials and started to maximize volume of steel production at home. Benny Wahyudi, Director General of Manufacturing Industry, stated in Jakarta on Monday [9/12] he was optimistic that dependency of Indonesia’ steel industry on imported steel raw materials would lessen. Because he said, by December 23 next, PT Krakatao Posco would start to operate to increase national stock of steel by 3 million tons. “We cannot go on depending on imported steel raw materials for our steel industry. We are determined to reduce import” Benny remarked.

Benny admitted that today steel industry in Indonesia was in trouble because of Rupiah weakening against USD. However, with additional supply of raw materials produced by PT Krakatao Posco, the local steel industry was much advantaged in the stuggle to adapt to the Rupiah new equilibirium. With additional production capacity from Posco, he was expecting that raw materials for slab and steel sheet would be reduced. Less dependency on imported raw materials was expected to jack up growth of steel industry next year.

He remarked further that in anticipating AEC 2015, the Government prioritized some industry sectors, i.e. agro-based industry, automotive, electronics, fishery, information technology, fishery, IT, rubber-based industry, textile and apparels and wood processing.

While trying to increase domestic production capacity, reduction of imported steel raw materials was also due to downturn of Rupiah value lately which caused anxiety among players of national steel industry; they had to reduce import of steel raw materials when Rupiah weakened. Executive Director of IISIA, Edward Pinem, stated that weakened Rupiah value would cause stagnation of the steel industry next year. He estimated sales of steel in 2014 to reach 7 million tons. IISIA predicted growth of steel industry would only be around 4% next year.

Furthermore he disclosed that players of the steel industry had to import to a high extent as Rupiah was depreciated. Import of raw materials when Rupiah weakened had the potential to erode national income from steel industry although today price of Hot Rolled Coil was moving up to as high as USD 700 per ton. He appreciated Government’s courageous step to set Rupiah exchange rate value at Rp 9,750 per USD in APBN State Budget 2014. Even if the assumption missed, he expected the Government to safeguard Rupiah value. Regardless of all the above hindtrances, he estimated Indonesia’s steel industry would grow by 8 percent in 2014. As recorded, total demand for steel at home in 2012 was 10 million tons.

Business News - December 13, 2013

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