This report profiles Indonesia’s steel industry, discussing market trends and outlook through 2013 and into 2014 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 second top steel consuming country in ASEAN with a market share of 20%, its steel demand showed the slowest growth rate in the region in 2013. Domestic steel consumption grew by 1.5% to 12.7mn tonnes in 2013, after recording double digit growth in 2012, in line with lower economic growth. Moreover, the increase in consumption did not benefit the local producers. Domestic steel production fell by 5.6% to 5.1mn tonnes. As local producers supply only about half of the country’s steel demand, Indonesia relies heavily on imported steel products to meet the increasing domestic demand. The largest country of origin for imports is from Japan, China and Russia.

Total import of iron and steel products increased marginally by 0.7% to a record-high of 12.8mn tonnes in 2013. Imports of hot-rolled steel products (wire rods and sections) and semi-finished products (slab and billet) command the largest share. Meanwhile, total export volume of iron and steel products dropped further by 23% to 0.80mn tonnes.

2014 will still be another challenging year for the domestic steel industry with competition from cheap Chinese imports, declining steel prices and depreciation in the Rupiah remaining a major area of concern for domestic steel producers.

Key Points:

• The increase in Indonesia’s steel consumption in 2013 was supported more by import, which grew to a record-high of 12.8mn tonnes, and not from domestic production.

• Domestic steel production declined by 5.6% y/y to 5.1mn tonnes in 2013. Bars and wire rods are the primary steel products and account for the largest annual production output of the industry.

• The gross domestic product (GDP) of the Indonesian iron and basic steel industry has increased over time in line with strong domestic infrastructure growth. The industry’s GDP rose by 7.7% y/y to IDR 9.5tn as of June 2014.

• The biggest obstacle that restricts the domestic steel industry is the declining international steel prices as a result of lower global steel demand while the production remains high. This, together with competition from cheap Chinese steel imports and depreciation of the Rupiah against the USD has squeezed industry players’ margins.