Steel-based industries hike prices amid supply gap
Steel-based industries hike prices amid supply gap
Tony Hotland, The Jakarta Post, Jakarta
Some of the country's industries that use steel as raw material
have recently raised their prices due to the rising international
price of the commodity.
Secretary-general of the Indonesian Steel Pipe Association
(Gapipa) Untung Yusuf said that local steel pipe makers had
increased the prices of their products by an average of 30
percent during the past three months.
"We definitely had to increase the price because the worldwide
price of HRC has been rising," he told The Jakarta Post over the
weekend.
He added that steel accounted for around 70 percent of the raw
materials used in the pipe production.
Hot rolled coil (HRC) and cold rolled coil (CRC) are the main
materials used to make steel. The international price of steel
currently stands at around US$420 per ton, which is a steep
increase from $310 per ton in December last year.
Untung said that currently the price of pipe, the annual
production of which reach up to 400,000 ton, was around $773 per
ton, and could even go up to $900.
"We've had complaints from our customers, but there's nothing
we can do. Now they're still buying pipes, but if the price
continues to rise, they may stop buying. Many of their projects
that are still in the planning phase have been put on hold," said
Untung.
The price of steel in the global market has been on the rise
amid high demand particularly from the fast-growing economy of
China. There has also been strong demand from Russia and Iraq,
which is currently under reconstruction following the U.S.-led
incursion in the country.
The strong international price has encouraged local steel
producers to also focus on the export market, further reducing
the supply at home. The country's annual steel production is
currently at 2.6 million tons, far from the annual demand of some
six million tons.
Meanwhile, national ship producer PT PAL Indonesia also plans
to make some upward adjustments in the price of its new ships.
The said that the scarcity of steel would also likely delay the
purchasing or building of new ships.
The country's automotive industry, however, has not been
adversely affected yet by the impact of the rising price of
steel, according to chairman of the Association of Indonesian
Automotive Manufacturers (Gaikindo) Bambang Trisulo.
"For now, we haven't really felt the impact of (steel
scarcity) because we order steel six to eight months in advance,"
he said, adding that he was optimistic that the price of steel
would eventually stabilize.
He said that the country's need for steel in the automotive
sector was largely met from countries such as Japan and the
United States.
In a bid to ease the burden of local industries, the Ministry
of Industry and Trade has recently opened up the import of steel
into the country. Previously, the ministry only allowed certain
local steel producers to import in a bid to protect the local
steel industry. But the ruling was scrapped last week to help
resolve the shortage of steel at home.
The ministry had also asked the Ministry of Finance to
eliminate the import duty on steel.
But Untung said that improvement in the import procedure and
the elimination of the import duty would not do much as long as
global demand for the commodity surpassed supply.
"It helps a little, but it won't help much because the product
itself is scarce now, and it's occurring worldwide," he lamented.