Indonesian Steel Producers Urge Gov't to Monitor Imports Better
Indonesian steel manufacturers urge the Indonesian government to improve the monitoring of steel trade as rising steel imports undermine the performance of domestic steel producers. Hidayat Triseputro, Executive Director of the Indonesian Iron and Steel Industry Association (IISIA), said domestic steel production capacity is indeed not enough to meet domestic steel demand. However, importers are currently taking advantage of the import policies, and this comes at the expense of expansion of the domestic steel industry.
Indonesian steel importers can enjoy free import duties on alloy steel. However, many of these importers are actually importing carbon steel (that have a very low alloy content). Therefore, this import policy of the government is not tight enough. Currently, the government is studying the issue.
Indonesia and other ASEAN countries have become major export markets for Chinese steel. China, the world's largest steel producer, is plagued by a major steel oversupply and therefore is in a position to - competitively - export steel to ASEAN nations.
Although steel imports into Indonesia declined in June 2017, Triseputro replied that declining steel imports is a normal phenomenon during the Ramadan month ahead of the Idul Fitri festivities. Based on data from Indonesia's Statistics Agency (BPS), Indonesia imported USD $450.4 million worth of steel in June 2017 (in terms of volume this is equivalent to 735,528 tons), down nearly 25 percent (y/y) from steel imports in the same month one year ago. However, these data are distorted because the Ramadan and Idul Fitri started earlier this year.
If we take a look at steel imports in the January-June 2017 period, then we detect a 19.8 percent (y/y) increase to USD $3.52 billion (or 6.65 million tons) worth of steel that was imported into Indonesia.
The World Steel Association recently said China has been boosting its steel output in the first half of 2017. China's steel production rose 3.9 percent (y/y) to 419.7 million tons in the January-June 2017 period. This puts more pressure on steel prices.