Indonesian mill Krakatau Steel has given a bearish Q2 outlook as steel demand remains under pressure.The company in its quarterly results states steel demand has dropped by over 50pc due to COVID-19 pandemic. Thus, its Q2 2020 (April-June) results would not be at par with its performance in the first quarter. The mill has posted profits in Q1 for the first time in the last eight years. 

Like many other countries, social distancing measures adopted by Indonesia hampered the functioning of steel-consuming businesses like automotive or construction. This decline in economic activity is expected to weigh down the steel sector. The company expects steel demand and its financial performance to in Q3 and Q4 2020. 

In the first quarter, Krakatau could lower its expenses through continuous and several management processes resulting in profits, according to the company release. The company’s operating expenses dropped by 31pc from the prior year to $46.8mn. The company states it managed to save $130mn in Q1 2020.

 

The steelmaker posted a net profit of $74.1mn in Q1 2020, from a net loss of $62.3mn in the prior year. Revenue declined by 40pc, while administrative and general costs declined by 41.5pc. 

Earlier this year, banks such as state-owned Bank Mandiri and Bank Negara Indonesia had instructed the steelmaker to restructure its loans totalling $2bn in its bid to avoid bankruptcy. With an annual production capacity of 3.15mn mt. Krakatau Steel produces several major finished steel products such as HRC, CRC and Wire Rod.

Other steelmakers see a plunge in sales 

Steelmaker PT Steel Pipe Industry of Indonesia (Spindo) witnessed the demand for steel pipe decline by 30pc in April and by almost 50pc in May. Steelmaker PT Sampurna Jaya Baja reported that its sales nosedived by 90pc in May. Losses were higher in May, than a reported rise of 50pc in March and 60pc in April compared to the prior-year period.

 

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