Steel makers ready to compete under AFTA

Steel makers ready to compete under AFTA

Adianto P. Simamora
The Jakarta Post
Jakarta

Indonesia's steel manufacturers are ready to compete with their
regional peers under the ASEAN free trade area (AFTA) as the
former group was more efficient than the latter, said an industry
executive.

Daenulhay, marketing director of state-owned steel maker PT
Krakatau Steel said that AFTA should provide more opportunities
for local companies to expand their markets in the region, he
told The Jakarta Post on Wednesday.

Krakatau is also the country's largest steel maker.

Under the AFTA agreement, which will be fully implemented on
Jan. 1 next year, import tariffs on various goods traded among
the six founding member countries of the Association of South
East Asian Nations (ASEAN) -- Indonesia, Malaysia, Singapore, the
Philippines, Thailand and Brunei -- must be lowered to between
zero and five percent.

Daenulhay said that Indonesia's import tariff on steel
products was already relatively low compared to those of other
neighboring countries, but local steel makers were still able to
survive competition with foreign players, both at home and
abroad.

Meanwhile, the Indonesian Steel Pipe Manufacturers Association
(Gapipa) is also upbeat that AFTA will benefit local producers.

"AFTA is good news for us, and we can boost exports to other
ASEAN countries because their steel industries are relatively
new," said Gapipa executive secretary Untung Yusuf.

The country's steel output reaches 2.89 million tons every
year, of which some 2.5 million tons are produced by Krakatau
Steel. Total consumption amounts to 3.9 million tons annually.

The government raised tariffs on imported steel products in
October this year to 20 percent on hot-rolled coil (HRC) and 25
percent on cold-rolled coil (CRC). The previous HRC tariff was
only 5 percent, while it was at 10 percent for CRC.

In comparison, Malaysia's import tariffs on HRC and CRC were
each set at 25 percent, which are 50 percent lower than previous
tariffs.

Thailand applied the Thai Industrial Standard and a surcharge
of 25 percent on steel imports, while tariffs in the Philippines
were also set at 25 percent.

Data from Krakatau showed that the United States had raised
its tariffs on imported steel to 30 percent, India to 40 percent
and European countries had raised tariffs to between 14 percent
and 26 percent.

Despite Krakatau's optimism, local steel makers were still
facing difficulties in competing with players from other
countries outside ASEAN, particularly China and India.

Local steel producers have long demanded protection on the
grounds that cheap imports had seriously hurt their business.

The Indonesia Antidumping Committee (KADI) is conducting an
investigation into imported HRC products from India, Russia and
China, which are sold here allegedly through dumping practices.

The Ministry of Industry and Trade had also been forced to
launch a special ruling to help protect local steel manufacturers
against cheaper imported products, particularly from China.