The Indonesian Iron and Steel Association (IISIA) predicts that steel sales in Indonesia will grow nearly 9 percent (y/y) to 12.5 million tons in 2016, from 11.5 million tons in 2015, on the back of new infrastructure projects. IISIA Director for International Relations Purwono Widodo adds that the market share of locally-produced steel is expected to rise from 40 percent to 60 percent. This is a positive development because the steel market in Indonesia has been dominated by imports (mostly from China).

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The competitiveness of Indonesia's steel industry remains weak. One of the main issues being the high gas price in Indonesia. High input costs make it difficult for the domestic steel industry to expand as investors prefer to import steel from abroad (mainly from China) for their infrastructure projects in Indonesia. Southeast Asia's largest economy needs about 12.5 million tons of steel per year. However, Indonesia's steel industry can only supply about 30 percent of this demand, the remainder being imported.

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Indonesia imports between 6.5 - 7.5 million tons of steel each year to meet domestic demand. Given that Indonesia's steel exports are insignificant it therefore implies that steel is one of the components that puts heavy pressure on the country's trade balance. The steel deficit of Indonesia is estimated to reach USD $7 billion this year. Indonesia requires some 12.5 million tons of steel per year for its construction projects. However, the domestic steel industry can only supply about 6 million tons of steel.

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After a three-year slowdown, the steel industry of Indonesia is showing some positive developments supported by government-led infrastructure projects in Indonesia and the rising global steel price. The price for (benchmark) hot rolled coil has surged 47 percent since the start of 2016 to USD $485 per ton (May 2016 delivery). In late 2015 the price of hot rolled coil was as low as USD $265 per ton. Moreover, the mandatory usage of locally-manufactured steel for the infrastructure projects will have a positive impact on Indonesia's steel industry.

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Indonesia's steel and iron producers urge the government to limit imports of steel into Indonesia as these imports are a burden on the domestic steel industry. Data from the Indonesian Iron and Steel Industry Association (IISIA) show that steel imports from China - the world's largest steel producer - into Indonesia jumped 94 percent year-on-year (y/y) to 3 million tons in 2015. This surge is particularly caused by foreign contractors working on infrastructure projects in Indonesia.

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Demand for steel in Indonesia is expected to rise in 2016 on enhanced infrastructure development. However, the majority of steel - approximately 60 percent of total demand in Indonesia - is still being imported from abroad (primarily China). Gusti Putu Suryawirawan, Director for Base Metal Industries at Indonesia's Industry Ministry, said the government is eager to support the domestic steel manufacturing industry in order to avert further domination of foreign manufactured steel on the Indonesian market.

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The overall capacity utilization of Indonesia's steel industry could grow to 80 percent from 50 percent currently. However, it will require government support. Hidayat Triseputro, Executive Director of the Indonesian Iron and Steel Industry Association (IISIA), is optimistic this target can be achieved as the government's push for infrastructure development is showing positive signs (in the second half of 2015 there have been more groundbreaking ceremonies for large government-led infrastructure projects across the country).

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Pemerintah Indonesia berencana menerapkan bea masuk anti-dumping sebesar 15% pada besi untuk mencegah impor besi besar-besaran dan mendukung industri besi domestik. Indonesia bukanlah negara pertama yang memberlakukan bea masuk impor anti-dumping pada produk-produk besi. Cina menerapkan bea masuk anti-dumping pada jenis tabung-tabung stainless steel tertentu dari Jepang dan Uni Eropa (dan karenanya meningkatkan kelebihan suplai besi dunia) sementara Malaysia menerapkan bea masuk anti-dumping pada hot rolled coils yang diimpor dari Cina dan Indonesia.

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Tata Steel Limited, the Indian multinational steel producer, recently announced its ambition to penetrate the Asia-Pacific region, including Indonesia. Although it remains unclear whether the company intends to establish a factory in Indonesia, an official of the company said that Tata Steel wants to enter Indonesia with downstream products in 2014 or 2015 as it sees potential in Southeast Asia's largest economy and aims to improve profitability by increasing efficiency in the operatives in the Asia-Pacific.

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Indonesia Investments has updated the company profile of Krakatau Steel, Indonesia's and Southeast Asia's largest steel producer. The company, which is for 80 percent government owned, has a crude steel production capacity of 2.45 million tons per year. However, through a lucrative joint venture with Posco, the world's third-largest steel producer, it will expand production capacity significantly in the years ahead. Besides steel production, the company has expanded into other industries.

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Steel pipe and tube manufacturer Steel Pipe Industry of Indonesia (Spindo), which has the largest steel pipe production capacity among manufacturers in Indonesia, is expected to show solid corporate earnings in the period ahead as the company bought raw materials for its production process when the hot-rolled coil (HRC) price was near its lowest at USD $265 per ton. Investa Saran Mandiri expects that Spindo's earnings will improve markedly starting from the second quarter of 2016 as the HRC price has risen to USD $485 per ton in May 2016.

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The price of steel has surged 20 percent to USD $365 per ton in April 2016 from USD $305 per ton at the start of the year. The primary reason for the higher steel price is China's plan to curtail the country's installed steel production capacity by a further 150 million tons over the next five years. In recent years the steel price has dropped significantly due to the global oversupply, mainly originating from the chronic steel oversupply in China where domestic demand declined amid the nation's economic slowdown.

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Pada awal 2014 Indonesia memperkenalkan larangan ekspor yang telah lama direncanakan untuk biji mineral mentah dalam usaha untuk memperkuat perekonomian domestik dengan mengurangi ketergantungan pada ekspor komoditi mentah dan mengharuskan para penambang untuk mengolah biji-biji mentah di dalam negeri sebelum ekspor diizinkan. Sebagai suplier global penting untuk sejumlah biji mentah, peraturan Indonesia yang baru ini (ditetapkan oleh UU No. 4/2009 mengenai Pertambangan Batubara dan Mineral) memiliki dampak yang signifikan pada pasar dan harga global, salah satunya nikel.

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