KS to focus on domestic market
Sari P. Setiogi, The Jakarta Post, Jakarta
State-owned steel manufacturer PT Krakatau Steel will continue to focus on the domestic market, even though the international price of the commodity is higher.
"Our domestic customers are loyal and long-term buyers. We shall put a priority on fulfilling domestic demand as long as the price is still high enough to cover our production costs," director of marketing Kemal Masduki told the media on Wednesday.
He said, this year the company may cut its exports from 20 percent to less than 10 percent. Krakatau is exporting to China, the U.S., Japan, Malaysia and some countries in Europe.
"We cannot totally disappear from the international market as we still need it, especially when the domestic market slows down," Kemal said.
Kemal said last August the international price of hot roll coil (HRC) was still US$295 per metric ton, but it was currently $430 per ton.
"Prices are now changing every week as worldwide demand is extremely strong," he said.
The local price is lower than the international price.
Strong economic growth in several countries such as China and Russia have pushed demand higher while at the same time supply is slowing down.
China has been the world's largest steel producer for seven consecutive years since its annual output exceeded 100 million tons in 1996. However, the country's growing appetite outstripped domestic production, which in turn forced it to make a huge import of steel products.
Krakatau predicted sales would reach around Rp 7 trillion (US$893.33 million) this year, from Rp 5.6 trillion last year.
Total national steel consumption in 2003 reached six million tons. The figure was close to that reached prior to the 1997 economic crisis (about 6.7 million tons).
In 2004, Krakatau plans to produce two million tons of steel. Last year the company produced 1.6 million tons.
World Steel Consumption (in million tons)
1998 1999 2000 2001 2002 2003 Growth
Europe 172.6 169.9 179.3 173.9 174.0 174.4 0.2%
Former USSR 21.9 25.8 30.3 33.0 30.1 32.6 8.3%
NAFTA 144.1 139.9 146.6 129.9 131.4 128.4 -2.3%
Latin America 24.5 21.9 24.9 28.7 27.5 28.3 2.9%
Africa 16.4 14.9 15.1 16.0 15.9 15.8 -0.8%
Middle East 15.8 16.2 17.7 18.7 19.7 20.8 5.7%
China 113.9 130.8 141.2 174.2 211.2 246.5 16.7%
Asia excl. China 167.4 179.7 197.3 192.4 202.4 212.2 4.9%
Australia & NZ 6.6 6.6 6.3 6.2 7.0 7.1 1.5%
World total 683.2 705.7 758.7 773.0 819.2 857.2 4.6%
Source: Krakatau Steel