Indonesian National Steel Industry Threatened by Chinese Products
Indonesian National Steel Industry Threatened by Chinese Products.
Indonesian Institute of Sciences (LIPI) head Lukman Hakim says the national steel industry is facing a major challenge from steel imported from China.
The local industry must improve its productivity and efficiency to compete, he said. “It must also prepare to compete with Chinese steel producers,” he said yesterday.
The implementation of the ASEAN-China free trade agreement (CAFTA), he added, had resulted in significant steel imports and a surplus from China. In 2010, total steel imports from China reached 1.5 million tons per year. However, since the trade agreement with China, the number has jumped by 170.8 percent.
To improve productivity and efficiency, the local steel industry is still facing problems in energy supply. According to the Indonesian Metal and Steel Industry Association deputy chairman, Irvan K. Hakim, gas supply has not been optimal. Yet, he said, gas remains the mainstay for businessmen, both for production processes and at power plants.
As a consequence of the shortfall in energy supplies, said Irvan, production costs had jumped. “In the end, competitiveness in the local and international markets is weak,” he said.
If the gas supply could be improved, the local steel industry could boost production from 70 percent to 90 percent.
Today, the national steel industry only produces 6.5 million tons of steel per year, much lower than the local demand of 9 million tons per year.
China on the other hand, produces 500 million tons per year.
LIPI’s economic research center analyst, Siwage, said that the quality of Indonesian steel did meet standards in the automotive and shipping industries.
He called on the government to seriously develop the national steel industry, for instance by providing a tax incentive. “The government’s role is still lacking,” he said.
Siwage suggested the steel industry invest in technological improvements. “So far, the technology cannot be transferred to processing or raw material utilization,” he said.
