Crisis beats metals demand in Indonesia

Crisis beats metals demand in Indonesia

SINGAPORE (Reuters): Base metals demand in Indonesia has taken a savage mauling from the currency crisis and Asian dealers said yesterday they doubt if any real recovery is possible this year.

"The situation is very poor. Customers are canceling projects. Indonesia is totally out of the (base metal) market," Vinod Kumar, director of metal company Donald Mcarthy, told Reuters.

"It's terrible. Indonesia is getting worse and worse," a senior aluminum trader for a European metal company said.

Indonesia has been ravaged by a currency meltdown that has seen the rupiah plunge below 10,000 to the U.S. dollar from about 2,450 before the start of the crisis in July 1997.

Asian dealers estimate Indonesian imports of copper cathodes reached around 200,000-250,000 tons in 1996, and may plunge to as little as 50,000-90,000 tons this year.

Indonesia aluminum imports look set to decline sharply too. Asian dealers estimate the country imported about 110,000 to 130,000 tons of aluminum in 1997 compared with around 120,000- 140,000 tons in 1996.

According to official figures, aluminum imports were much lower at 62,000 tons in 1994 and 96,000 tons in 1995.

"As the situation looks now, the fall in aluminum imports in Indonesia will probably be worse than 50 percent this year (from previous year levels)," one trader said.

Kumar said his company used to sell about 30,000-35,000 tons of copper, 15,000 tons of zinc and around 2,000 tons of nickel to Indonesia annually.

"I haven't seen any order for these metals the last two months," he said.

With Indonesia leading the way, a Japanese zinc dealer said his earlier estimate that zinc consumption outside of Japan and South Korea will fall by 50 percent in the first half of 1998 will have to be revised.

"I was very conservative at that time. The fall will be more severe than that," he said.

He said zinc consumption will slide by at least 60 percent to around 40,000 tons from 100,000 tons in 1997. He added that a fall of 70 percent may be "too severe."

"It's very bad in Indonesia. They cannot just bear the import value of metals at these levels," the dealer said.

"They're running out of money. It will be quite difficult for the plants there to stay afloat," a trader added.

The situation in the rest of Southeast Asia, where the crisis got going last year when the Thai baht was effectively devalued, is not much better, dealers said.

"Demand everywhere else like in Thailand, Malaysia and the Philippines is down. We'll probably get a better grip on how low the figures are after the first quarter of this year," a dealer said.

"The ASEAN (base) metal business scenario is very, very hazy," Kumar added. "It's depressing. I don't feel any incentive to go to the office this morning."