| Jakarta, Feb 20 (ANTARA) - The global economic crisis has begun impacting Indonesia's iron business with the steel industry now making every possible effort to shore up sales amid excessive stocks, a gloomy world market and declining domestic demand.
In the face of this condition, the Indonesian Iron and Steel Industry Association (IISIA) has called on the government to take swift actions to save the national steel industry from bankruptcy.
"I think, the government should take the necessary steps immediately to save the steel industry from bankruptcy," IISIA chairman Fazwar Bujang told a hearing with the House's Industry Commission recently.
The director of metal industry of the ministry of industry, I.G. Putu Suryawirawan said on Thursday that Indonesia's domestic steel industry was holding an excess production stock of 2.5 million tons due to declining exports and domestic demand as a result of the current global economic crisis.
According to Taufiqurrahman Ruki, chief commissioner of state-owned steel producer PT Krakatau Steel, the drop in the steel sales this year is among others caused by small absorption from the domestic market and decreasing exports as a result of weakening global and regional economy as well as limited liquidity in the financial sector.
Other factors contributing to the decline of the company's sales were rising interest, weakening capital market and rupiah exchange rate against the US dollar and rising inflation, he said.
With declining exports and domestic demand, steel stocks at home are increasing.
"The IISIA said it had around 2.5 million tons in excess stocks of long and flat products of various sizes. That was the position unveiled yesterday during a meeting with the trade minister,", Putu Suryawirawan said on Thursday.
This condition is dangerous with regard to the continuation of domestic steel industry because the excess stock comprised almost half of the national production which is about 5.5 to 6.5 million tons per annum.
The national steel production in 2006 stood at 5.3 million tons, and 6.5 million tons in 2007. Since September 2008, the production began to decline, so that in 2008 production will be not be different from that in 2007.
The installed capacity of around 100 national steel plants reaches six million tons while its utilization, in normal conditions, reaches four million tons a year.
In the past four years, steel imports tended to increase in line with rising domestic demand for the commodity. In 2008, it was estimated that Indonesia's total steel imports reached 1.5 million tons while domestic need for steel was estimated at 6 million tons per annum.
According to Bujang, who is also president director of state-owned steel producer PT Krakatau Steel, the utilization of steel industry has declined from 80 percent in early 2008 to abut 20 to 40 percent, however.
Last year the price of steel continued to increase from first to third quarter making the price of pellets, pig iron, scarp and semi-finished products such as sponge, slab and fillet to rise and simultaneously followed by an increase in the buying price of raw materials for steel industry.
"Entering the fourth quarter of 2008 the price dropped sharply as a result of oil price slump and global financial crisis triggering reduction in steel demand and the weakening of consumers' purchasing power," he said.
In an effort to overcome the problems facing national steel industry, Fazwar Bujang asked the government to raise steel import duty by 20 to 30 percent, channeling a pledged fiscal stimulus and making an inventory of steel importers in the country.
"Steel producers will not object to the import of special steel, because not all steel could be produced in Indonesia particularly that for automotive. But we also asked the government not to import steel products which can be produced domestically," Bujang said.
In the meantime, the House of Representatives (DPR)'s Commission XI on financial affairs called on the government to raise steel import duty in an effort to protect the domestic steel industry.
"It is the obligation of the government to protect steel industry at home from imported steel products and prevent massive layoffs. Imported steel products have now posed a big problem in the domestic market," Commission XI chairman Hafiz Zanawi said last week.
Zanawi said that steel industry at home could not survive only with stimulus in the form of income tax cuts. Increase import duty would be more effective, he said.
About the conditions of PT Krakatau Steel (KS), economist of the Gajah Mada University, Ichsanudin Noorsy, recently suggested that the government should order other state-owned enterprises in need of steel products to purchase the commodity from KS.
"KS can call PT PAL and sell its steel to the state shipbuilding firm. It can also call state-owned railway firm PT KAI to build railway tracks in Sumatra and Java," he said.
After all, PT PAL, which is now building two ships ordered by Germany is expected to build 16 other ships until 1012. Virtually, PT KS will supply 14,000 tons of steel to PT PAL for the construction of two ships being ordered by Germany.
According to I.G. Putu Suryawirawan, the government is pushing domestic demand by requiring use of local products in all government projects. He said imports would be also monitored to avoid excess.
"There must not be too many products coming from outside the country meaning that price dumping must never happen here. In short illegal imports and dumping must be prevented," he said.
He said the industry ministry was now still listing local products that had to be used in government projects. "We are still making the list. There are many kinds of products in the metal sector including aluminum and steel. Identification of government projects that could increase their absorption of domestic products is now also still being carried out," he said. ***2*** (T.A014/A/HAJM/17:35/a014) (T.A014/A/A014/A/A014) 20-02-2009 17:39:50 |
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