Table of Contents
This report profiles Indonesia's steel industry, discussing market trends and outlook through 2014 and into 2015 and beyond. The report also highlights key leading players in the sector including PT Krakatau Steel, PT Bakrie and Brothers, PT Gunawan Dianjaya Steel, and PT Jaya Pari Steel.
Despite the fact that Indonesia is the third top steel consuming country in ASEAN with a share of 20%, its steel demand showed a marginal growth rate of 1.6% in 2014 in line with lower economic growth. Moreover, the increase in steel consumption was met by imported products as local producers supply only about half of the country's steel demand. The largest country of origin for imports is China, which faces a chronic oversupply.
Total import of iron and steel products increased marginally by 0.9% to 12.9mn tonnes in 2014. Imports of slab, hot-rolled coil/plate (HRC), wire rods and bars command the largest share. Nevertheless, imports of HRC declined, while exports surged in line with the increase in domestic production as new steel plants come on-stream. Total export volume of iron and steel products climbed to 1.76mn tonnes.
For 2015 and beyond, national steel demand is expected to continue rising, supported by growth in the construction and infrastructure sectors. However, the industry faces several challenges; among them include the intense competition from cheap Chinese imports, continuously declining steel prices and further weakening of the Rupiah. These current market conditions hamper the profitability and margins of domestic steel producers, and hence remain a major area of concern.
o Domestic steel consumption increased slightly by 1.6% in 2014, but local producers only managed to supply about 50% of the domestic consumption.
o Domestic steel production increased by 27% y/y in 2014, mainly due to higher hot-rolled plate production. Bars, plates and wire rods account for the largest annual production output of the industry.
o Capacity utilisation rate of crude steel improved in 2014; however some products still saw decreases in the production utilisation. Capacity utilisation is expected to pick-up in the coming years amid investments in new steel mills production and efficiency.
o It is expected that the construction sector will be the primary driver of demand for the domestic steel industry, although the biggest obstacle restricting demand is the declining steel prices and higher electricity and exchange rate costs.
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