Indonesia is likely to overtake India to become the second-largest stainless steel producer in the world backed up with massive capacity build-up by Chinese stainless steel companies that will be operational this year. Highlighting the challenges faced by the Indian SS producers, the Indian Stainless Steel Development Association (ISSDA) released a statement on Tuesday.
Data from International Stainless Steel Forum (ISSF) suggests that Indonesia is the fourth highest producer of SS, globally, and will overtake Japan and India with a total production capacity of 4.2mn mt by the end of 2021, which is a jump of 75pc compared to 2020.
| Year-wise stainless steel melt shop production (MT) | ||
|---|---|---|
| Year | India | Indonesia |
| 2018 | 3.7 | 2.2 |
| 2019 | 3.9 | 2.3 |
| 2020 | 3.2 | 2.4 |
| 2021(e) | 3.5 (ISSDA projection) | 4.2 (Projection in ISSF conference) |
(Source: ISSDA)
ISSDA President KK Pahuja points out that Indonesia’s SS production capacity of around 5.5mn mt will help Chinese companies export SS from Indonesia. This will hurt the Indian SS industry as the government has already withdrawn Countervailing Duty since the announcement in the Union Budget in February, which will lead to excessive imports into India. From the beginning of May, China has withdrawn the tax rebate offered to steelmakers exporting from the mainland to regulator steel prices in the domestic market.
Indonesia situation
With the additional SS capacities being set up by Chinese companies production will be 25-folds higher than demand. Indonesia’s domestic SS demand is 0.2mn mt. ISSDA claims the excess capacity is targetted towards export markets. Chinese companies have a favourable environment in Indonesia with proximity to raw material and local incentives, notes ISSDA.
Production in Indonesia has been stable for three years at around 2.2 to 2.4mn mt. Globally, China is the largest SS producer with a production capacity of 30mn mt, comprising 60pc of total global production in 2020. China’s SS production rose 2.5pc in 2020 while global SS production fell 2.3pc due to the impact of the pandemic.
Hindrances for Indian market
Indian SS markets are plagued with large scale dumping of SS flat products with 24pc of the market comprising of imports in the pre-COVID era, half of them were from Indonesia. Due to a slump in demand, Indian SS firms are operating at 60pc capacity while exporting countries are building capacities. ISSDA fears additional exports from Indonesia will damage the domestic market which is reeling under the impact of the second wave of COVID-19 pandemic.