Indonesia's steel demand to increase: Analyst

JAKARTA (JP): Indonesian demand for steel will go up by 7 percent annually over the next 10 years to about nine million tons in 2000 and 13.5 million tons in 2008, an iron and steel analyst predicts.

Southeast Asia Iron and Steel Institute assistant Bambang Susatiawadi said yesterday that domestic demand would increase from an estimated 7.3 million tons this year.

"The prospect of steel demand reflects the countries' economic plans, industrial structures and industrial development forecast," Bambang said at a conference on Indonesian steel.

The projection was based on an optimistic outlook of economic growth of about 7 percent.

Economists, however, have predicted that the currency crisis, which has eroded the rupiah's value against the U.S. dollar by about 35 percent since July, will lower the country's economic growth to between 5 percent and 7 percent next year.

Bambang said the country's steel industry would have to raise its production capacity.

"The current domestic supply is far below domestic demand," he said.

Last year's production capacity of 3.8 million tons could only meet about 44 percent of the 6.9-million-ton demand, he said.

He said development of the upstream steel industry was important in pursuing steel industry growth and promoting a strategic economic alliance.

But lack of capital and technology and insufficient infrastructure had caused very slow development of the upstream steel industry in the country, he said.

The government could not provide the huge investment needed to finance the upstream steel industry, while the involvement of private sectors was limited, he said.

A strategic alliance between the government, private sectors and foreign investors would contribute to the establishment of a viable upstream steel industry, he said.

"In the long run, Indonesia should make plans to establish several new integrated steel plants with a total capacity of 10 million tons a year starting 2006 to satisfy the domestic market as a base to enter the global market," he said.

The integrated plant already in operation had turned out to be incapable of providing enough steel to consumers in Indonesia, he said.

Bambang said another problem facing the Indonesian steel industry was that producers had to import raw material and supporting material.

Indonesia had a limited supply of iron ore and coal for the upstream steel industry, he said.

At the same time, Indonesia had abundant natural gas resources for energy, but gas prices tended to increase, he said. (das)