Govt may cut tariff on steel import

The Jakarta Post, Jakarta

The government is considering slashing import duty tariffs on steel to between 5 and 10 percent to ensure high global prices would not hurt local industry, the customs head said.

Director General of Customs and Excise Eddy Abdurrachman said on Wednesday a study was exploring the possibility of reducing the tariffs, which currently stand at between 20 and 25 percent. The cuts were proposed earlier by the Ministry of Industry and Trade, he said.

They would make steel-based industries more competitive, Eddy said.

"The Minister (of Finance Boediono) is yet to come up with a decision, which means it's still under consideration. We should wait and see," he said.

The customs and excise office is a department under the Ministry of Finance.

Driven by the bullish economy of China and the reconstruction of Iraq, the global price of steel is rising, standing at about US$420 per ton, against $310 per ton in December last year.

The Ministry of Industry and Trade proposed the tariff cuts to help ease the burden on local companies that used steel as a raw material.

Steel consumers, including industrial pipe producers and shipmakers, have recently passed on their increased costs, raising the prices of their products. There are fears other sectors, including the automotive industry, will follow suit.

The Indonesian Steel Pipe Association (Gapipa) said steel pipe makers had increased the prices of their products by an average of 30 percent during the past three months to cope with price rises.

A strong global price has also encouraged local steel producers to focus on the export market, reducing the supply at home and putting more upward pressure on prices. Indonesia produces 2.6 million tons of steel per annum, far from the national demand of some 6 million tons.

The Ministry of Industry and Trade has already removed trade barriers on steel imports, opening up the market. Previously, it allowed only certain local steel producers to import the good to protect the local industry.

The policy was scrapped last week to reduce the shortages.