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.