To strengthen the country’s iron and steel industry and reduce its dependence on steel billet imports, President Joko Widodo instructed his cabinet members to support the local steelmaking industry on Wednesday, according to Indonesian media. Iron and steel product imports contributes the most to Indonesia’s trade deficit.
The government’s statistics department estimated iron and steel product imports amounted to $10.39bn in 2019, up 1.42pc from the prior year. The Indonesian government plans to roll out a new ferrous scrap import rules to make enough raw material available for domestic steelmakers. Scrap metal at present is included in the list of dangerous and hazardous waste and importers need a licence and permits from various ministries for imports.
Currently, there is no clarity on when the new policy is likely to become effective.
Increase in capacity utilisation
At present, Indonesia is utilising 40pc of its steelmaking capacity, with mills lacking raw material supply.
If the total capacity is utilised effectively, Indonesian steelmakers can meet the country’s 70pc domestic demand.
Steel bodies in the country have also complained against substantial volumes of steel products being imported from China despite Indonesia levying anti-dumping duties.
Associations state these imports hurt domestic profit margins.
Relaxation of scrap import rules
Once applicable, Indonesian imports of ferrous scrap may double to 5mn mt, according to industries minister Agus Gumiwang Kartasasmita. Though the policy will reduce documentation, it will retain quality control measures to discourage countries from dumping substandard ferrous scrap in Indonesia.
Coronavirus lockdown impacted imports
Chinese staff working in Indonesian mills were unable to report to work after the Lunar New Year holidays amidst the Coronavirus lockdown in China. This hampered operations at mills thereby reducing demand for ferrous scrap supply since mid-January.
Imports of semis and ferrous scrap
Indonesia’s billet imports in the Jan-Nov 2019 period were at 4.19mn mt, up from 3.11mn mt in the prior-year period. Its imports of ferrous scrap in the period were 2.41mn mt, up 12.13pc from Jan-Nov 2018.