Indonesia’s steel industry has experienced quite positive growth in 2021, despite the fact that Covid-19’s challenges continue to pose a threat to the world’s industrial sector. In the third quarter of 2021, Indonesia’s steel industry grew by more than 9.82%, according to data from the Indonesian government office. statistics (BPS). In addition, this positive growth is also related to the export of steel products. In November 2021, the export value of steel products reached 19.6 billion US dollars, with a profit of 6.1 billion US dollars.
The government regulation is essential to the development of Indonesia’s steel sector. Budi Susanto, Metal sector Director of the General Directorate of Metals, Machinery, Transport Equipment, and Electronics Industry (ILMATE), represented the Ministry of Industry (Kemenperina), who indicated that the strong expansion of the steel sector is attributable to the government’s control efforts. To emphasize execution, the government proposed the concept of “smart supply and demand” and shifted the country’s iron and steel industry from upstream to downstream. This increase was also fueled by rising steel demand, which was aided by the car industry’s PPnBM policy, which grew to 27% in the third quarter of 2021.
“It is essential that the value of domestically produced goods be maximized.” And practically all existing imports are raw materials for diverse sectors,” Budi Susanto stated in his remark.
According to the Indonesian Iron & Steel Industry Association (IISIA), investment in the steel sector was almost USD 12 billion in 2021 and is expected to increase by USD 15.2 billion or IDR 215 trillion in 2022. This is, of course, tied to rising domestic steel demand as well as rising exports, particularly in the downstream steel sector.
The availability of raw resources to maintain investment in the country is the consequence of the development of the steel industry in Indonesia today. There are issues in the upstream business, particularly carbon steel, which is still unable to meet Indonesia’s domestic demand. Melati Sarnita, Commercial Director of Krakatau Steel, stated that according to data from the Government Bureau of Statistics Indonesia (BPS), steel imports increased by 23% from 3.9 million tons in 2020 to 4.8 million tons in 2021. However, other experts believe that using 2020 statistics is pointless considering the state of the sector in Indonesia at the time, which is severely impacted by the Covid-19 outbreak. When compared to 2019 statistics, which is still considered more relevant, steel imports in 2021 experienced a fairly good dip, falling 31% from 6.9 million tons in 2019 to 4.8 million tons in 2021.
Furthermore, unfair trade practices such as dumping and moving tariff posts encouraged the increase in the volume of steel imports. Melati stated that the greatest growth in steel imports happened in Cold Rolled Coil (CRC) products, which increased by 70% or roughly 1.5 million tons in 2021, from only 881 thousand tons in 2020. Meanwhile, imports of other items, such as Hot Rolled Coil (HRC), climbed by 16%, and imports of Coated Sheet steel products increased by 18%.
Indonesia continues to import carbon steel from international steel exporting countries to this day. Steel imports are expected to be Indonesia’s second largest non-oil and gas import commodity. According to Ahmad Rijal Ilyas, Executive Director of the Research Oriented Development Analysis (RODA) Institute, the government has put together many schemes to limit imports, including:
1. Import substitution program, which includes lowering the value of imports for some steel products.
2. The P3DN program encourages the use of domestic products.
3. The use of mandatory SNI to safeguard domestic customers against low-quality steel products.
4. Providing incentives aimed at increasing investment in the metals sector
Steel manufacturers in Indonesia anticipate that, in addition to the government-prepared programs, import licenses would need to be tightened, particularly for steel goods that may be produced domestically.
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