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The condition of steel industry in 2008 had a spectacular achievement, but in the following year,
2009, it fell down to the extreme point. Although in 2008, in the first half, this sector was able to gain
significant profit from the steel price movement in the global market, but the profit gained by the producer
was vanished just in three months. Several upstream and downstream steel companies gained the profit
from the high price of global steel, such as HRC-hot rolled coil that reached the price of US$ 1,250 per ton
in July 2008, however, since September, the steel price was decreased rapidly to only US$ 450 per ton in
December of the same year. The price decrease of HRC steel was maintained almost during the year of
2009, even in May 2009, it reached the lowest point of only US$ 395 per ton.
Therefore, the performance of production and sales of domestic steel industry was drastically
decreased during the year of 2009. So, the utilization level of the installed capacity was recorded only 35%
- 40% of the normal condition of about 60%. Meanwhile, the consumption side tended to be stagnant
compared with the market absorption in 2008, which reached 10 million tons. The production decrease of
raw material utilization in form of iron ore and semi finished steel product, which mostly imported, was
decreased sharply. The decrement of the performance during the year of 2009 was caused by the impact of
the global financial recession that pressed down the steel price more than 50%.
Data that was released by the Central Bureau of Statistics (Badan Pusat Statistik - BPS) at 1
February 2010, indicated the import value of iron and steel products (tariff post group No. 72), during the
year of 2009 was decreased 47.37%, from US$ 8.282 billion to become only US$ 4.357 billion. On the other
hand, iron and steel goods import (HS No. 73) in 2009 was also decreased 16.55% compared with the year
of 2008, from US$ 3.335 billion to become US$ 2.783 billion. So based on this data, the Ministry of Industry,
during 2009, the growth of iron and steel basic metal industry was decreased to the lowest point during
the last five years to become -7.19% compared with the year of 2008, which was still grew about 1.3%.
The condition of global steel price was recovered to have a significant increase at the end of 2009,
in December 2009, the global HRC price reached US$ 585 per ton and in February 2010, it was increased to
become US$ 620 per ton. It is estimated that this year, the global HRC price could reach the highest point
of US$ 800 per ton, encourages by the increase of iron ore price and the global economic recovery since
November 2009.
World Steel Association (World Steel), revealed that the iron ore supplying countries, such as
Brazil and Australia, recently are raising the raw material price, because China, India, and Middle East
Region are still maintaining the stability of steel production at the highest point. Meanwhile, scrap price
that is the raw material of steel long product group, such as iron profile and infrastructure support, are
also increased at the lower range.
China as the largest steel producer in the world has overflowing steel supply in facing the current
year increasing demand. In the middle of the global recession, China is forcing steel production in mass, so
it increased 13.5% to become 567.8 million tons. Therefore, the business circle is worried of the impact of
the market liberalization implementation of ASEAN - China Free Trade Agreement (ACFTA), which could
encourage the steel import in huge amount from China. Moreover, the Ministry of Industry has predicted
that the implementation of ACFTA could cause the steel import from China in 2010 to increase 170.76%
compared with the import realization in 2009, from 554,000 tons to become 1.5 million tons.
The implementation of ACFTA would cause the component value of tariff duty of Chinese steel
product would be eliminated, whereas, China is still providing the facility of export VAT rebate of 9% -
13% in the steel sector. This condition could cause the Chinese steel price becoming more competitive than
the local steel product. Therefore, the global steel price could be controlled by them, while the domestic
producer would be difficult in competing with China because they are faced by the increment of the
production cost, raw material cost, and transportation cost, as well as the government expenditure that
absorbs local steel product is still low.
In facing the free market of ACFTA, the government plans to postpone the implementation
schedule, especially for steel product, which previously in this year, to become the year of 2018. Likewise,
the effort of the Ministry of Industry to tighten the steel product import from China by implementing the
compulsory SNI for some products that have not obtained SNI, such as CRC (cold rolled coil). Then the
regulation of Minister of Commerce (Permendag) No.21/ M-DAG/PER/6/2009, about iron and steel
product import, should be verified first at the originating loading port, starting 25 July 2009.
On the other hand, to improve the competitiveness, PT Krakatau Steel would accelerate the
development of upstream steel factory of PT Meratus Jaya in this year in South Kalimantan with the value
of US$ 250 million. Meratus is a joint venture company between PT Krakatau Steel and PT Aneka
Tambang Tbk. Then, cooperating with government owned company of South Korea, Pohang Iron and
Steel Company (Posco), in August 2010, PT KS would start the first phase development of plate mill
factory with production capacity of 3 million tons in Cilegon, Banten. This plan is the part of the integrated
steel factory development based on hot rolled coils (HRC), slab (plate and HRC raw material), and steel
plate with total capacity of 6 million tons, with investment value of US$ 6 billion. Even, to reach the target
of fund acquisition of Rp 1 – 2 trillion, PT KS would conduct initial public offering (IPO) in October 2010 at
the Jakarta Stock Exchange.
Therefore, the interesting condition of the recent steel industry dynamics, PT Media Data Riset as
one of the service companies of data and information provider, has prepared the study of “Condition of
Steel Industry in Indonesia in facing the Free Market AC-FTA. This study discussed the recent condition
of upstream steel industry (raw material and basic steel), slab and billet, intermediary steel of HRC/CRC,
and other various downstream products. This product covered the production capacity, production
development, new and expansion project, consumption, consumption projection, price development, and
its prospect.
This comprehensive study is very useful for the players in the steel industry sector, prospective
investors, financing institution, or other related industries. The book of study is prepared in two volumes,
the first volume consisted of upstream and semi finished steel industry, and the second volume consisted
of downstream steel industry. This book of study is offered with the price of Rp 6,500,000 (Six million five
hundred thousand rupiah) per copy (for two volumes) for the Indonesian version, or US$ 900 (Nine
hundred US Dollar) per copy (two volumes) for the English version. For those who are interested could
directly contact PT Media Data Riset, Jakarta, by telephone number (021) 809 6071,Mobile :0812 1031 5177
(Sumadi) or by facsimile number (021) 809 6071. The Order Form is attached. For overseas or outside
Jakarta order, delivery fee would be charged.
Study of:
STEEL INDUSTRY CONDITION IN INDONESIA
FACING THE FREE MARKET AC-FTA, 2010
June, 2010
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Indonesia version - Rp 6.500.000 (Six million five hundred thousand rupiah)
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