Lacking a key driver to support demand has been limiting Indonesia’s steel demand at an average 12 million tons a year, lagging behind its peers in Southeast Asia, Purwono Widodo, executive committee at the Indonesian Iron & the Steel Industry Association, said in a discussion on Wednesday, Feb. 7, in Jakarta.
Vietnam’s steel demand has jumped to 22 million tons a year on the back of robust consumption from the construction sector, while Thailand relies on its automotive industry to boost demand to 19 million tons a year, according to IISA data.
“We have a problem with consumption. Our steel demand has grown in the past 20 years, but it only grows in line with the country’s GDP growth,” said Widodo, who is also marketing director of Indonesia’s state-owned steel company PT Krakatau Steel. “We don’t have any key driver that can catapult demand.”
The country’s industry had initially hoped that automotive industry and shipyard could support domestic demand, but the growth in both industries was insufficient to increase steel consumption, Widodo said. Construction sector also is yet to lift Indonesia’s steel consumption significantly, despite the government has been pushing for infrastructure projects.
With stable demand growth, Indonesia’s steel consumption is forecast to consume 59 kilograms of steel per capita in 2019, up slightly from 55 kg/ per capita.
“As long as the government and the industry players can’t determine the key driver, our steel consumption will only grow by 5-7 percent. We’re lucky, if it can grow by 10 percent. But it won’t jump by 22 percent like Vietnam’s demand,” he said.
While demand has remained stagnant, domestic production is still unable to fill it. Imports still account for around 40 percent of the country’s total consumption.
The industry is now ramping up the domestic capacity to meet demand, Widodo said.
According to the Industry Ministry, there’s $3 billion investment new investment in metal processing this year. The investment comes from existing smelters that are expanding their capacity and from new plants.
They are PT Fajar Bhakti Nusantara, which invest US$350 million to expand its nickel pig iron plant in Gebe West Papua and Virtue Dragon, a Chinese company, which is expanding its ferronickel smelters in Konawe, Sulawesi with investment of US$2.5 billion.
Harjanto, director general of Metal, Machinery, Transportation and Electronics Industries at the Industry Ministry, said there are 34 smelters with investment worth 752.62 trillion rupiah. The smelters consist of iron ore smelters, nickel ore, bauxite copper concentrate, stainless steel and aluminium.
The country’s steel smelter capacity reaches 7.6 million tons (Krakatau Posco has 3 million tons of capacity, Krakatau Steel at 1.2 million tons, and Dexin Steel in Morowali at 3 million tons), data from the Industry Ministry shows. Indonesia also has stainless steel slab smelters with a capacity of 2 million tons. ‘
Supply-Demand and Capacity Utilization of Indonesia’s Steel Industry 2016
| Product | Capacity | Production | Export | Demand | Utilization | Import | Import Ratio | Condition |
| Slab | 5,200 | 2,839 | 751 | 3,597 | 55% | 1,509 | 42% | Low Utilization |
| Billet | 4,842 | 1,907 | – | 3,331 | 39% | 1,424 | 43% | Low Utilization |
| HRC | 2,700 | 2,051 | 88 | 3,215 | 76% | 1,252 | 39% | Need Expand |
| Plate | 3,200 | 1,500 | 378 | 1,325 | 47% | 203 | 15% | Low Utilization |
| CRC | 1,690 | 959 | 1 | 1,814 | 57% | 856 | 47% | Need Expand |
| WR | 2,155 | 595 | 56 | 1,382 | 28% | 844 | 61% | Low Utilization |
| Rebar | 6,791 | 1,673 | 36 | 2,056 | 25% | 420 | 20% | Low Utilization |
| Profile | 1,331 | 764 | 11 | 966 | 57% | 213 | 22% | Low Utilization |
| Coated Sheet | 1,650 | 801 | 31 | 2,241 | 49% | 1,471 | 66% | Need Expand |
| Pipe & Tube | 2,392 | 1,288 | 60 | 1,484 | 54% | 256 | 17% | Low Utilization |
Source: IISA
Quantity in 000’MT
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