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THE STRUCTURE AND
PROSPECTS OF THE
INDONESIAN STEEL INDUSTRY DSTI/SU/SC(2013)13 75th Steel Committee Meeting Paris, 5-6 December 2013
• Indonesia has experienced rapid growth in steel demand. It is ranked as the 4th fastest growth rate over the past decade.*
• The country is the fastest growing market in the ASEAN region.
• In 2012, apparent steel use reached a new high level of 12.5 mmt.
* Amongst those economies that consume at least 5 million tonnes of steel per year.
Note: Bubble sizes represent the magnitude of finished steel consumption in 2012.
Sources: OECD Secretariat based on GDP and steel consumption data from the International Monetary Fund and the World Steel Association.
A new player in the global steel market
-The fastest growing market in ASEAN-
CZE
FRA
DEU
ITA
POL
ESP
GBR
TUR
RUS
MEX
USA
BRA
DZA
EGY
ZAF
IRN
SAU
ARE CHN
INDIDN
JPN
KORMYS
PHL
TWN
THA
VNM
AUS
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
ASU(2002-2012)
Real GDP (2002-2012)
Evolution of GDP and finished steel consumption
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
CAGR(2002-2012)
Steel consumption - top 20 fastest growing economies
Finished steel
Crude steel
World: 5.5% (Finished steel): 5.2% (Crude steel)
• Construction has been the largest driver of steel consumption.
• Demand for construction materials has expanded rapidly. Most of the demand for plate was to serve the construction sector.
• Automotive industry is also playing an important role.
Note: The consumption shown in the graphs are not adjusted for double counting of products.
Sources: OECD Secretariat based on steel consumption data from World Steel Dynamics and the South East Asia Iron and Steel Institute.
Steel demand drivers
-Infrastructure and automotive
playing a dominant role-
0
100
200
300
400
500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2002 = 100 Evolution of steel demand (Long Products)
Bars
Structurals
Wire Rods
0
100
200
300
400
500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2002 = 100 Evolution of steel demand (Flat Products)
Plates
Hot-rolled Sheets & Strips
Cold-rolled Sheets & Strips
Galvanized Sheets
• Indonesia used to produce most of the long and flat steel products that it consumed.
• The country has become an important net importer of steel.
• Apparent steel use is met largely by imports (import ratio: 63%).
Note: The consumption shown in the graphs are not adjusted for double counting of products.
Source: OECD Secretariat based on steel consumption and trade data from the South East Asia Iron and Steel Institute.
1992 2012
The structure of steel supply and demand
-A significant net importer of steel-
Sections
Bars
Wire R
ods
Plates
Hot-rolled
Sheets
& S
trips
Cold-rolled
Sheets
& S
trips
ElectricalS
heets
Galvanized
Tinplates
Other M
etallic-coated S
heets
Pipes &
Tubes
Self-Sufficiency Import
100%
150%
200%
250%
50%
0%
20% 40% 60% 80%
Sections
Bars
Wire R
ods
Other Long products
Plates
Hot-rolled
Sheets &
Strips
Cold-rolled
Sheets &
Strips
Electrical S
heets
Galvanized
Sheets
Tinplates
Other M
etallic-coated S
heets
Pipes &
Tubes
Self-Sufficiency Import
100%
150%
200%
250%
50%
0%
20% 40% 60% 80%
• Asia and CIS regions are major sources of imports. Semi-finished products and flat products are main import items.
• The country needs steel products to meet its growing demand, particularly for high-value added flat products.
Source: Indonesia trade statistics.
The structure of trade
-Growing needs for imports to
meet steel demand-
372 149 4 113 0 53 5 12 709 5.5
Ingots & Semi-finished 745 0 23 2629 0 400 10 11 3818 29.4
Bars 488 0 9 2 1 0 0 14 514 4.0
Sections 555 0 3 1 1 - 0 1 560 4.3
Wire Rods 484 0 6 0 0 - - 0 489 3.8
Other Long Products 97 0 3 0 0 0 0 1 101 0.8
Plates (Carbon) 595 0 4 138 0 0 - 0 737 5.7
Hot-rolled (Carbon) 1602 - 3 42 0 0 0 0 1647 12.7
Cold-rolled 1275 - 2 1 0 - - - 1280 9.8
Galvanized Sheets 371 - 0 - 1 0 - 0 372 2.9
Other Coated Sheets 570 0 8 0 3 0 0 0 581 4.5
Alloy Steel Flat 466 0 22 2 2 1 1 7 500 3.9
Pipes & Tubes 1038 0 85 1 9 52 2 7 1194 9.2
Steel Wire 166 0 2 0 0 0 0 1 168 1.3
8451 1 168 2816 17 453 13 44 11961 92.0
43 0 6 0 0 1 0 0 50 0.4
251 0 8 1 3 0 0 12 275 2.1
9116 149 186 2930 21 507 19 67 12995 100.0
70.2 1.2 1.4 22.5 0.2 3.9 0.1 0.5 100.0
2012/2007 (%)
200-300100-2000-1000
300-
South America Africa Oceania Total
Total Steel Products
Cast Iron Pipe
Secondary Product
Total Iron & Steel Products
Share (%)
Share
(%)
Iron Products
Asia Middle East EU27Other Europe
(incl. CIS)
North
America
• Indonesia’s steel production has lagged compared with other ASEAN economies since the late 1990s.
• However, it has the potential to boost its steel production thanks to the expansion of several projects.
Sources: OECD Secretariat based on steel production data from the World Steel Association and the South East Asia Iron and Steel Institute.
OECD for crude steelmaking capacity.
The situation of steel supply
-A potential to boost steel production-
0
50
100
150
200
250
300
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1996 = 100 Evolution of crude steel production
Indonesia
Malaysia
Thailand
Philippines
-10000
-5000
0
5000
10000
15000
20000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Thousandtonnes Crude steelmaking capacity in Indonesia
Gap (A) - (B)
Capacity (A)
Consumption (B)
Major steel projects
-Construction of the largest blast furnace
in ASEAN-
Source: OECD Secretariat.
• Indonesia will soon have ASEAN’s first large-scale blast furnace.
• This should have significant impacts on the structure of steel supply and demand in Indonesia.
Operation Operation
Date Date
1.2 mmt 2015 5 Bekasi West Java 0.4 mmt 2016
→3.5 mmt 2014 6 Bekasi West Java 1.2 mmt 2013
3.0 mmt 2013 2.0 mmt 2015
3.0 mmt - 1.4 mmt 2015
Plate mill 1.5 mmt 2013 8 Bekasi West Java →0.7 mmt 2014
3 Cilegon West Java 0.5 mmt 2015 9 Surabaya East Java 1.0 mmt 2015
0.25 mmt 2012
0.25 mmt 2014
11 Makassar South Sulawesi 0.5 mmt 2012
Rebar/Small sections mill
4 Indoferro Cilegon West JavaPhase 2 of project
0.3 mmt 2012
Essar Indonesia Cold strip mill
Sermani Indonesia CGL
Krakatau Osaka Steel Gunawan Dianjaya Steel Plate mill
Blast furnace10 Meratus Jaya Iron & Steel
Kalimantan
Tanah Bumbu
South
KalimantanDRI
CGL
Hot strip mill Gunung EAF
2 Krakatau POSCO Cilegon West Java
Blast furnace, BOF7 Gunung Raja Paksi Bekasi West Java
Blast furnace
Phase 2 of project BOF
Company Location Facility Capacity
1 Krakatau Steel Cilegon West JavaBast furnace JFE Steel Galvanizing
No Company Location Facility Capacity No
❾❺❻❼❽
❶❷❸❹
❿⓫
• Protectionism has been on the rise in recent years.
• Indonesia is a relatively active user of trade remedy measures.
• Various efforts to curb imports, such as SNI (Standard National Indonesia), safeguard and antidumping duties.
- Antidumping : Six AD investigations have been initiated since 2008.
- Safeguard: Four SG investigations have started since 2010.
- Non-tariff measures (NTMs): Various measures (e.g. Compulsory standard, Pre-shipment inspection, Labeling requirement).
• The lack and low quality of infrastructure (e.g. roads, ports and electricity supply)
• Fuel subsidies*
• Low capacity utilisation
• Low profitability * In June 2013, the Indonesian government increased subsidized-fuel price.
Several challenges
-Rising trade protectionist measures-
• Numerous factors are expected to support its steel demand.
• Indonesia aims to reach ASU per capita to 100kg by 2025.
• Regarded as a strategic industry in economic development, the steel industry is one of the key industries of the Master Plan.
Notes: The figures in the right-hand figure present the actual relationship between GDP and steel consumption to 2012. Future scenarios from 2013 are
constructed using an assumed GDP growth rate of 5% and a steel consumption-GDP elasticity of 1.58 (finished steel) and 1.72 (crude steel). The elasticities are
derived from the relationship between GDP and steel consumption for 2002-2012. Note that the elasticities do not take into account other factors affecting steel
consumption.
Sources: OECD calculations based on GDP and consumption data from the International Monetary Fund and the World Steel Association.
Prospects for the Indonesian steel market
-A strategic industry in economic
development-
0
5000
10000
15000
20000
25000
Thousandtonnes
Steel consumption scenarios of future in Indonesia
Crude steel
Finished steel
Actual
Indonesia (2012)
Malaysia
Philippines
Thailand
Viet Nam
China
India
BrazilMexico
Russian Federation
Korea
Chinese Taipei
Czech Republic
Spain
Italy
Japan
Germany Canada
United States
France Netherlands
Australia
Indonesia (2025)
0
200
400
600
800
1000
1200
0 10000 20000 30000 40000 50000 60000 70000
kg
GDP per caita (USD current price)
Finished steel consumption per capita vs. GDP per capita (2012)
Macroeconomic indicators in Indonesia
(Quarterly and Monthly)
Sources: Badan Pusat Statistik for real GDP growth, consumer price index, industrial production index and trade. Bank Indonesia for BI rate and retail sales
index. Gaikindo for automotive production and sales.
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
I II III IV I II III IV I II III IV I II III IV I II III IV I II III
2008 2009 2010 2011 2012 2013
%Real GDP growth
GDP growth
5
5.5
6
6.5
7
7.5
8
8.5
9
9.5
10
09.1 4 7 10
10.1 4 7 10
11.1 4 7 10
12.1 4 7 10
13.1 4 7 10
% BI rate
BI rate
0
1
2
3
4
5
6
7
8
9
10
09.1 4 7 10
10.1 4 7 10
11.1 4 7 10
12.1 4 7 10
13.1 4 7 10
% Consumer price index
Consumer price index
90
95
100
105
110
115
120
10.1 3 5 7 9 11
11.1 3 5 7 9 11
12.1 3 5 7 9 11
13.1 3 5 7 9
2010 = 100 Industrial production index
Industrial production index
4000
6000
8000
10000
12000
14000
16000
18000
20000
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Million USD Trade
Exports
Imports
60
80
100
120
140
160
180
10.1 3 5 7 9 11
11.1 3 5 7 9 11
12.1 3 5 7 9 11
13.1 3 5 7 9
2010 = 100 Retail sales index
Retail sales index
0
20
40
60
80
100
120
09.1 4 7 10
10.1 4 7 10
11.1 4 7 10
12.1 4 7 10
13.1 4 7 10
Thousandunits
Automotive production
Automotive production
0
20
40
60
80
100
120
09.1 4 7 10
10.1 4 7 10
11.1 4 7 10
12.1 4 7 10
13.1 4 7 10
Thousandunits
Automotive sales
Automotive sales
Steel trade in Indonesia
(Monthly)
Source: ISSB Limited.
0
200
400
600
800
1000
1200
1400
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Thousandtonnes Total iron & steel imports
Total iron & steel imports
0
50
100
150
200
250
300
350
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Thousandtonnes Total iron & steel imports from major exporters (1)
China
Japan
Korea
Chinese Taipei
0
100
200
300
400
500
600
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Thousandtonnes Steel imports (Semi-finished products)
Imports (Semi-finished products)
0
50
100
150
200
250
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Thousandtonnes Steel imports (Long products)
Imports (Long products)
0
100
200
300
400
500
600
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Thousandtonnes Steel imports (Flat products)
Imports (Flat products)
0
50
100
150
200
250
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Thousandtonnes Steel imports (Pipes & Tubes)
Imports (Pipes & Tubes)
0
20
40
60
80
100
120
140
160
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Thousandtonnes Total iron & steel exports
Total iron & steel exports
0
50
100
150
200
250
300
350
09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7
Thousandtonnes Total iron & steel imports from major exporters (2)
Russian Federation
Ukraine
Steel demand
There was a significant growth in steel demand over the past decade.
Construction and automotive are playing an important role in steel demand.
Indonesia used to produce most of the products that it consumed. However, it has become an important net importer of steel.
Steel supply
Indonesia will soon have ASEAN’s first large-scale blast furnace. This should have significant impacts on the structure of steel supply and demand.
The country’s steel production has lagged compared with other ASEAN economies. However, it has the potential to boost its steel production.
Challenges and Future prospects
Protectionism has been on the rise in recent years.
Numerous factors are expected to support the country’s steel consumption.
The steel industry is one of the key industries of the Master Plan.
Summary of findings
Thank you for your attention