According to the latest reports, the Indonesian government is planning to impose 7.5% to 10% of import tariffs on downstream products in an effort to curb imports and in case of raw materials this import duty is likely to be around 2.5%.
At present, the Indonesia government is studying the HS (Harmonised System) – where steel products are classified under different groups, which is expected to be completed by the end of this month.
This is being done by the country’s government to improve the current account deficit (the situation where the country’s imports exceed exports) which is currently at 3%. Indonesia Statistics recorded a USD 2.03 billion trade deficit in July 2018, compared to the trade surplus of USD1.74 billion in the previous month.
A study on Indonesia’s trade balance suggests that the country has been suffering this year, with a trade surplus recorded in only March and June. High global oil prices and the strengthening of the U.S. dollar resulted in Bank Indonesia (Central Bank of Indonesia) using the foreign exchange reserve to intervene in the market.
How is Indonesia’s steel import market scenario?
According to Indonesian Iron and Steel Industry Association (IISIA) the country has imported 6.43 MnT of steel last year, equating to 48% of the national steel demand.
This figure was slightly lower compared to the steel imports of 6.85 MnT in 2016 and the 6.49 MnT imported in 2015. However, the import figure in 2018 still raises concerns as the country remains one of the world’s top five steel importers every year.
As per the IISIA director, the import portion should be no more than 30% of national demand and given the current situation, there is a supply-demand imbalance in the country’s steel market.
IISIA has projected Indonesia’s annual steel consumption to gradually increase from 13.4 MnT last year to 23 MnT in 2025 and 45 MnT in 2035.
To reduce the country’s dependence on imports along with increasing import duty, the Industry Ministry has thrown its full support behind the development of three steel industry clusters with a total investment value of at least USD 14.89 billion. These clusters will be located in Cilegon, Banten; Batulicin in South Kalimantan and Morowali in Central Sulawesi province of Indonesia.
These three clusters would complement each other and be able to cater to domestic demand by supplying high-quality steel products.
Indonesia’s key steel producers include Krakatau Steel, Gunung Steel and PT Bintangdelapan Investama (BDI) along with Chinese and South Korean companies will develop these three industrial parks.
In October 2017, Indonesia has extended its import duties on flat-rolled steel and non-alloy steel products until 2019 to protect domestic producers.
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