Rini scraps ruling on steel import arrangement

The Jakarta Post, Jakarta

The Ministry of Industry and Trade has dropped an earlier ruling which put controls on the import of steel products following protests from local industries hit by a supply shortage at home.

Director general for the steel industry and machinery at the ministry Subagyo was quoted by Antara that the decision to cancel the ruling was made on Tuesday.

"The new decision is not aimed at resolving the shortage problem, but to ease the burden of domestic industries," he said on Thursday.

The ministry issued Decree No. 711 in January this year, which stipulated that only producers of steel and steel products could import the commodity. The move was aimed at protecting local manufacturers of steel and steel products.

But the policy was strongly criticized by industries using steel products as raw materials as it reduced the supply at home.

Steel producers have been focussing on exports as the price of steel and steel products in the international market has surged due to strong demand from China and Iraq.

The imbalance between supply and demand has caused the price of steel on the international market to surge to US$420 per ton last month, compared to $310 per ton at the end of last year.

Subagyo predicted the international price could further increase to $450 per ton in April.

The higher international price has also pushed up the price of the commodity at home, especially since the import of steel is subject to an import duty of between 15 percent and 125 percent.

In addition to the high price, local industries also faced shortages, threatening the business of the automotive and property industry, among others, which use steel as a raw material.

Although China is among the world's largest steel producers, its domestic production could not fully meet local demand amid a booming economy.

Demand from Iraq has also been strong as the country is the process of reconstruction following the war. Analysts also said that demand from Russia had also been quite significant amid brisk economic development.

Steel consumption in China reached 100 million tons in 1996, and is projected to double in 2005, according to one estimate.

Elsewhere, Subagyo acknowledged that the strong international price would tempt local producers to export their steel products, instead of selling them at home.

"But our office and related associations will tightly monitor the import and export of steel," he said, but fell short of saying whether the government would move to ban exports.