The government has introduced a new trade regulation on the importation of steel commodities to protect the domestic steel industry, which is facing a major downturn.
The regulation, which will be effective starting April 1 and will require steel importers to process certification and, prior to importing, to file a report to an appointed surveyor on their steel commodity needs.
The Industry Ministry’s director general for metal, machinery, textile and miscellaneous industries Ansari Bukhari said Thursday that the regulation is needed to protect the domestic steel industry which is far behind in many aspects. compared to imported steel products.
“The main problem facing our steel industry is over-dependency on imported raw materials, especially in the upstream steel industry.
“Our steel manufacturing technologies are also far behind other countries,” he told reporters at
his office.
Ansari admitted that the regulation is basically to build a higher barrier to prevent foreign steel imports from flooding into the country.
The regulation applies to protect all 202 listed domestically produced steel products including Hot Rolled Coil (HRC) and Hot Rolled Plate (HRP).
Reports say that consumers such as property developers prefer imported steels to domestic
ones because of cheaper price and better quality.
Businesspeople have reportedly said that these circumstances have led to dependency on imported raw materials, whilst local steel production technology is not yet that advanced
Due to this dependency, steel industry players have to import raw materials paid in US dollars , while selling their products domestically in Indonesian rupiah.
Now, that the rupiah is tending to weaken against the US dollar and due to lack of demand from abroad because of the global economic crisis, the domestic steel industry is facing a major downturn.
“Over the last two years, steel production has been declining from 4.16 million tons to 4.08 million tons. But thankfully, we still managed an increase in our steel exports valued at US$2.4 billion in 2008 compared to $1.8 billion in the previous year,” Ansari said.
“Our steel industry utilization was only around 60 percent in 2008, which means we produced only about 4 to 6 million tons out of our total capacity of nine million tons,” Ansari said.
Ansari also said recently that he predicted that industry utilization of capacity would go down by about 20 to 40 percent in 2009, bringing projected total output down to between 2.4 to 2.8 million tons.
To improve the efficiency of the country’s steel industry, the ministry proposes to help introduce a new technology called Direct Iron Ore Smelting (DIOS), under a cooperation program with Japan.
The cooperation is under the Indonesian-Japan Economic Partnership Agreement (IJ-EPA).
“The new technology allows processing on low calorie ember stones and utilizing smaller inputs of iron ores, making it suitable for Indonesia’s available natural resources,” Ansari said.
However, even Japan has yet to apply the technology because of their lack of natural resources, which makes the effectiveness and efficiency on the new technology somewhat questionable.
“Indonesia is not being used as an experimental laboratory, but Japan sees that our country has better resources to implement the technology. Japan will also help to fund the pilot project using the technology,” Ansari said.
Ansari said this technology was still in the knowledge-transfer stage and therefore he had yet to calculate the investment needed.
The regulation, which will be effective starting April 1 and will require steel importers to process certification and, prior to importing, to file a report to an appointed surveyor on their steel commodity needs.
The Industry Ministry’s director general for metal, machinery, textile and miscellaneous industries Ansari Bukhari said Thursday that the regulation is needed to protect the domestic steel industry which is far behind in many aspects. compared to imported steel products.
“The main problem facing our steel industry is over-dependency on imported raw materials, especially in the upstream steel industry.
“Our steel manufacturing technologies are also far behind other countries,” he told reporters at
his office.
Ansari admitted that the regulation is basically to build a higher barrier to prevent foreign steel imports from flooding into the country.
The regulation applies to protect all 202 listed domestically produced steel products including Hot Rolled Coil (HRC) and Hot Rolled Plate (HRP).
Reports say that consumers such as property developers prefer imported steels to domestic
ones because of cheaper price and better quality.
Businesspeople have reportedly said that these circumstances have led to dependency on imported raw materials, whilst local steel production technology is not yet that advanced
Due to this dependency, steel industry players have to import raw materials paid in US dollars , while selling their products domestically in Indonesian rupiah.
Now, that the rupiah is tending to weaken against the US dollar and due to lack of demand from abroad because of the global economic crisis, the domestic steel industry is facing a major downturn.
“Over the last two years, steel production has been declining from 4.16 million tons to 4.08 million tons. But thankfully, we still managed an increase in our steel exports valued at US$2.4 billion in 2008 compared to $1.8 billion in the previous year,” Ansari said.
“Our steel industry utilization was only around 60 percent in 2008, which means we produced only about 4 to 6 million tons out of our total capacity of nine million tons,” Ansari said.
Ansari also said recently that he predicted that industry utilization of capacity would go down by about 20 to 40 percent in 2009, bringing projected total output down to between 2.4 to 2.8 million tons.
To improve the efficiency of the country’s steel industry, the ministry proposes to help introduce a new technology called Direct Iron Ore Smelting (DIOS), under a cooperation program with Japan.
The cooperation is under the Indonesian-Japan Economic Partnership Agreement (IJ-EPA).
“The new technology allows processing on low calorie ember stones and utilizing smaller inputs of iron ores, making it suitable for Indonesia’s available natural resources,” Ansari said.
However, even Japan has yet to apply the technology because of their lack of natural resources, which makes the effectiveness and efficiency on the new technology somewhat questionable.
“Indonesia is not being used as an experimental laboratory, but Japan sees that our country has better resources to implement the technology. Japan will also help to fund the pilot project using the technology,” Ansari said.
Ansari said this technology was still in the knowledge-transfer stage and therefore he had yet to calculate the investment needed.
Source: The Jakarta Post , JAKARTA | Fri, 02/20/2009 10:20 AM | Business
