Low demand forces many steel plants to stop production

JAKARTA (JP): Low demand and higher production costs have forced many local steel-related companies out of business, an industry executive said yesterday.

The chairman of the Federation of Indonesian Steel Industries (Gapbesi), Zainal Musa, said most steel factories were now producing at less than 50 percent of their normal capacity because most construction projects had been halted since the monetary crisis started last July.

"Some steel producers have reduced production and some factories have even stopped all their production activities," Zainal told members of the House of Representatives.

The country's 12 producers of welded wire mesh under Gapbesi had stopped producing, he said.

He said six producers of billet and iron concrete in Jakarta and another two plants in Surabaya, East Java, had also stopped production activities.

The remaining 19 companies were currently only producing 10 percent to 30 percent of their production capacities, he said.

Zainal said two producers of iron sheets in Medan (North Sumatra), and one each in Padang (West Sumatra), Palembang (South Sumatra) and Jakarta had also stopped operating.

The remaining seven of the 12 members of the Association of Iron Sheets Producers in Indonesia were only utilizing 28 percent of their production capacities, he said.

Four out of the 11 nail and wire manufacturing factories in the country had stopped producing, while the remaining seven plants were only using a maximum of 40 percent of their capacities.

The 13 companies grouped in the Association of the Iron Sheet Truncation in Indonesia were only utilizing 10 percent of their maximum capacity.

The 15 local producers of steel pipes in the country were only using 15 percent of their production capacities.

Zainal said six out of the seven producers of wire rods in the country were running at between 20 percent and 50 percent of their capacities.

Only the state-owned PT Krakatau Steel was using up to 75 percent of its wire rod production capacity.

At yesterday's hearing, Zainal told House Commission V for industry, mining, trade, manpower, cooperatives and the environment that the recent high increase in electricity loan expense tariffs had further depressed the steel industry.

He said the industry had experienced 358 percent and 370 percent increases in power bills since the government raised the load expense tariffs in May.

Gapbesi urged the government and state-owned electricity generator PT Perusahaan Listrik Negara (PLN) to cut the load expense tariff rise to a maximum of 37 percent.

It demanded no more tariff rises for at least four years or the cancellation of the plan to raise the basic electricity tariffs.

The association also asked PLN to let the troubled factories delay their payments of the May power bills. (das)