Steel makers ready to compete under regional free trade scheme

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.