Indonesia Investments wishes all Muslims a happy & generous Ramadan
25 May 2018 (closed)
USD/IDR (14,166) -39.00 -0.27%
EUR/IDR (16,582) -47.80 -0.29%
Jakarta Composite Index (5,975.74) +29.20 +0.49%
When looking at the trade data that were released by Indonesia’s Statistics Agency (BPS) on Monday (16/04) there is something interesting about Indonesia’s steel exports. Indonesia is a relatively small steel producing nation (and actually imports about half of its domestic steel consumption, mostly from China) but its iron & steel exports to the USA soared over 1,500 percent month-on-month (m/m) from USD $2.13 million in February 2018 to USD $35 million in March 2018. Reason behind this surge may very well be the trade war between China and the USA.
About a month ago US President Donald Trump decided to impose a 25 percent import tariff on steel imports into the USA. It was a move that particularly aims at improving the US trade balance vis-à-vis China (although the tariffs apply to all inward steel shipments, with only a few countries being exempted) and support the domestic US steel industry. Trump’s decision (as well as his announcement of more tariffs for other products from China) resulted in severe concerns over a total trade war, especially after China and the European Union said they would impose retaliatory tariffs.
Although it is likely that the trade war between China and the USA contributed to the surge in Indonesian steel shipments to the USA (even though Indonesia is not exempted from the 25 percent tariff), BPS Head Suhariyanto says it is too early to tell. If in the following months this trend continues, then we can take some more accurate conclusions. He added that although the 1,500 percent growth figure in March is impressive, steel shipments to the USA still constitute a very small amount in terms of actual value (USD $35 million).
Hidayat Triseputro, Executive Director of the Indonesian Iron and Steel Industry Association (IISIA), agrees and said surging steel exports to the USA are likely to be related to Trump’s trade policies. However, he added that there is a gap of about three months between the order and actual delivery of steel. Thus, most orders should have been made before Trump's steel tariff announcement. Most likely, US importers were already anticipating Trump’s new trade policy and therefore ordered more-than-usual steel from abroad.
Based on BPS data, the value of Indonesian exports of steel and iron rose by 125.1 percent to USD $1.25 billion in the first quarter of 2018 (compared to the same period one year earlier). This is a great result that could give some momentum to Indonesia’s steel manufacturing industry. However, there are concerns about the structural development of Indonesia’s steel industry. The country has already fallen behind Vietnam and Thailand in terms of largest steel manufacturing capacity in Southeast Asia. Analysts say a key problem is that steel demand in Indonesia shows ups and downs based on the start en completion of projects. If steel demand would be structurally high, then it could give a great boost to the industry.