Krakatau Steel awaits government positive action

27 April 2015

State-run steel giant PT Krakatau Steel has demanded that the government immediately impose higher fees on imported steel entering the country to save the domestic steel industry from falling.

“We urge the government to soon raise import duties to around 20 percent for foreign-made steel to help local steelmakers offset a steel-price slump and unfair competition from foreign sellers,” Krakatau Steel independent commissioner Roy E. Maningkas said in a limited press briefing on Friday.

The government currently imposes a 0 to 5 percent tariff on imported steel, far lower than tariffs in Malaysia and Thailand, which stand at 20 percent and around 40 percent, respectively, he said.

In addition, a number of foreign steelmakers had alloyed their steel with a variety of elements and set the price below fair market value, Roy said.

To compete with foreign steelmakers, Krakatau Steel has adjusted its steel price with a low market price of between US$380 and $390 per ton, a wide gap from its production costs that hit around $600 per ton, he said.

Domestic steel production hits only around 4 million tons per annum, below the country’s total demand for steel that stood at around 13 million tons last year, according to data from Southeast Asia Iron and Steel Institute (SEAISI) and Krakatau Steel.

While local steel supply does not fulfill demand yet, Chinese steels have been so far dominated Indonesia’s steel market.

The China National Bureau of Statistics has revealed that China produced 69.5 million tons of steel in March, with the country accounting for almost half of global steel consumption.

In contrast, Krakatau Steel — which controls 45 percent of the country’s steel output — has registered ballooning losses over three consecutive years.

The company — whose shares are traded on the bourse under the code KRAS — booked $149.8 million in net losses last year, a surge from $20.43 million in 2012.

Indonesian Iron and Steel Industry Association (IISIA) chairman Hidayat Triseputro said that most domestic steelmakers hoped the government would soon carry out infrastructure projects this year to help raise demand for domestic steel.

“However, if the potential market for domestic steels is supplied with imported steels [through unfair competition], the government needs to protect the local industry,” he told The Jakarta Post.

Hidayat added that the government needed to provide a tool to curb steel smuggling, which occurred through certain areas, such as Batam.

Mahmud Syaltout, international trade law and policy expert with the University of Indonesia (UI), said that the government could further impose an antidumping duty if it was proven that foreign steelmakers lowered their steel prices below their own cost of goods sold.

“If steel is still considered a strategic industry, the state may order the National Intelligence Agency [BIN] to partner with universities or research institutions to investigate products and the prices of imported steels,” he told the Post.

Roy said he was upbeat that his firm would register a better financial performance this year if the government started imposing higher import duties for steel.

The Industry Ministry has previously stated that the government planned to raise import duties for steel to around 15 percent as of the second semester of this year.