THE STRUCTURE AND PROSPECTS OF THE INDONESIAN … 5 3 OECD Naoki - Copy.pdf · the structure and prospects of the indonesian steel industry dsti/su/sc ... are chn ind idn jpn kor

THE STRUCTURE AND

PROSPECTS OF THE

INDONESIAN STEEL INDUSTRY DSTI/SU/SC(2013)13 75th Steel Committee Meeting Paris, 5-6 December 2013

• Indonesia has experienced rapid growth in steel demand. It is ranked as the 4th fastest growth rate over the past decade.*

• The country is the fastest growing market in the ASEAN region.

• In 2012, apparent steel use reached a new high level of 12.5 mmt.

* Amongst those economies that consume at least 5 million tonnes of steel per year.

Note: Bubble sizes represent the magnitude of finished steel consumption in 2012.

Sources: OECD Secretariat based on GDP and steel consumption data from the International Monetary Fund and the World Steel Association.

A new player in the global steel market

-The fastest growing market in ASEAN-

CZE

FRA

DEU

ITA

POL

ESP

GBR

TUR

RUS

MEX

USA

BRA

DZA

EGY

ZAF

IRN

SAU

ARE CHN

INDIDN

JPN

KORMYS

PHL

TWN

THA

VNM

AUS

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

ASU(2002-2012)

Real GDP (2002-2012)

Evolution of GDP and finished steel consumption

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

CAGR(2002-2012)

Steel consumption - top 20 fastest growing economies

Finished steel

Crude steel

World: 5.5% (Finished steel): 5.2% (Crude steel)

• Construction has been the largest driver of steel consumption.

• Demand for construction materials has expanded rapidly. Most of the demand for plate was to serve the construction sector.

• Automotive industry is also playing an important role.

Note: The consumption shown in the graphs are not adjusted for double counting of products.

Sources: OECD Secretariat based on steel consumption data from World Steel Dynamics and the South East Asia Iron and Steel Institute.

Steel demand drivers

-Infrastructure and automotive

playing a dominant role-

0

100

200

300

400

500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2002 = 100 Evolution of steel demand (Long Products)

Bars

Structurals

Wire Rods

0

100

200

300

400

500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2002 = 100 Evolution of steel demand (Flat Products)

Plates

Hot-rolled Sheets & Strips

Cold-rolled Sheets & Strips

Galvanized Sheets

• Indonesia used to produce most of the long and flat steel products that it consumed.

• The country has become an important net importer of steel.

• Apparent steel use is met largely by imports (import ratio: 63%).

Note: The consumption shown in the graphs are not adjusted for double counting of products.

Source: OECD Secretariat based on steel consumption and trade data from the South East Asia Iron and Steel Institute.

1992 2012

The structure of steel supply and demand

-A significant net importer of steel-

Sections

Bars

Wire R

ods

Plates

Hot-rolled

Sheets

& S

trips

Cold-rolled

Sheets

& S

trips

ElectricalS

heets

Galvanized

Tinplates

Other M

etallic-coated S

heets

Pipes &

Tubes

Self-Sufficiency Import

100%

150%

200%

250%

50%

0%

20% 40% 60% 80%

Sections

Bars

Wire R

ods

Other Long products

Plates

Hot-rolled

Sheets &

Strips

Cold-rolled

Sheets &

Strips

Electrical S

heets

Galvanized

Sheets

Tinplates

Other M

etallic-coated S

heets

Pipes &

Tubes

Self-Sufficiency Import

100%

150%

200%

250%

50%

0%

20% 40% 60% 80%

• Asia and CIS regions are major sources of imports. Semi-finished products and flat products are main import items.

• The country needs steel products to meet its growing demand, particularly for high-value added flat products.

Source: Indonesia trade statistics.

The structure of trade

-Growing needs for imports to

meet steel demand-

372 149 4 113 0 53 5 12 709 5.5

Ingots & Semi-finished 745 0 23 2629 0 400 10 11 3818 29.4

Bars 488 0 9 2 1 0 0 14 514 4.0

Sections 555 0 3 1 1 - 0 1 560 4.3

Wire Rods 484 0 6 0 0 - - 0 489 3.8

Other Long Products 97 0 3 0 0 0 0 1 101 0.8

Plates (Carbon) 595 0 4 138 0 0 - 0 737 5.7

Hot-rolled (Carbon) 1602 - 3 42 0 0 0 0 1647 12.7

Cold-rolled 1275 - 2 1 0 - - - 1280 9.8

Galvanized Sheets 371 - 0 - 1 0 - 0 372 2.9

Other Coated Sheets 570 0 8 0 3 0 0 0 581 4.5

Alloy Steel Flat 466 0 22 2 2 1 1 7 500 3.9

Pipes & Tubes 1038 0 85 1 9 52 2 7 1194 9.2

Steel Wire 166 0 2 0 0 0 0 1 168 1.3

8451 1 168 2816 17 453 13 44 11961 92.0

43 0 6 0 0 1 0 0 50 0.4

251 0 8 1 3 0 0 12 275 2.1

9116 149 186 2930 21 507 19 67 12995 100.0

70.2 1.2 1.4 22.5 0.2 3.9 0.1 0.5 100.0

2012/2007 (%)

200-300100-2000-1000

300-

South America Africa Oceania Total

Total Steel Products

Cast Iron Pipe

Secondary Product

Total Iron & Steel Products

Share (%)

Share

(%)

Iron Products

Asia Middle East EU27Other Europe

(incl. CIS)

North

America

• Indonesia’s steel production has lagged compared with other ASEAN economies since the late 1990s.

• However, it has the potential to boost its steel production thanks to the expansion of several projects.

Sources: OECD Secretariat based on steel production data from the World Steel Association and the South East Asia Iron and Steel Institute.

OECD for crude steelmaking capacity.

The situation of steel supply

-A potential to boost steel production-

0

50

100

150

200

250

300

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1996 = 100 Evolution of crude steel production

Indonesia

Malaysia

Thailand

Philippines

-10000

-5000

0

5000

10000

15000

20000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Thousandtonnes Crude steelmaking capacity in Indonesia

Gap (A) - (B)

Capacity (A)

Consumption (B)

Major steel projects

-Construction of the largest blast furnace

in ASEAN-

Source: OECD Secretariat.

• Indonesia will soon have ASEAN’s first large-scale blast furnace.

• This should have significant impacts on the structure of steel supply and demand in Indonesia.

Operation Operation

Date Date

1.2 mmt 2015 5 Bekasi West Java 0.4 mmt 2016

→3.5 mmt 2014 6 Bekasi West Java 1.2 mmt 2013

3.0 mmt 2013 2.0 mmt 2015

3.0 mmt - 1.4 mmt 2015

Plate mill 1.5 mmt 2013 8 Bekasi West Java →0.7 mmt 2014

3 Cilegon West Java 0.5 mmt 2015 9 Surabaya East Java 1.0 mmt 2015

0.25 mmt 2012

0.25 mmt 2014

11 Makassar South Sulawesi 0.5 mmt 2012

Rebar/Small sections mill

4 Indoferro Cilegon West JavaPhase 2 of project

0.3 mmt 2012

Essar Indonesia Cold strip mill

Sermani Indonesia CGL

Krakatau Osaka Steel Gunawan Dianjaya Steel Plate mill

Blast furnace10 Meratus Jaya Iron & Steel

Kalimantan

Tanah Bumbu

South

KalimantanDRI

CGL

Hot strip mill Gunung EAF

2 Krakatau POSCO Cilegon West Java

Blast furnace, BOF7 Gunung Raja Paksi Bekasi West Java

Blast furnace

Phase 2 of project BOF

Company Location Facility Capacity

1 Krakatau Steel Cilegon West JavaBast furnace JFE Steel Galvanizing

No Company Location Facility Capacity No

❾❺❻❼❽

❶❷❸❹

❿⓫

• Protectionism has been on the rise in recent years.

• Indonesia is a relatively active user of trade remedy measures.

• Various efforts to curb imports, such as SNI (Standard National Indonesia), safeguard and antidumping duties.

- Antidumping : Six AD investigations have been initiated since 2008.

- Safeguard: Four SG investigations have started since 2010.

- Non-tariff measures (NTMs): Various measures (e.g. Compulsory standard, Pre-shipment inspection, Labeling requirement).

• The lack and low quality of infrastructure (e.g. roads, ports and electricity supply)

• Fuel subsidies*

• Low capacity utilisation

• Low profitability * In June 2013, the Indonesian government increased subsidized-fuel price.

Several challenges

-Rising trade protectionist measures-

• Numerous factors are expected to support its steel demand.

• Indonesia aims to reach ASU per capita to 100kg by 2025.

• Regarded as a strategic industry in economic development, the steel industry is one of the key industries of the Master Plan.

Notes: The figures in the right-hand figure present the actual relationship between GDP and steel consumption to 2012. Future scenarios from 2013 are

constructed using an assumed GDP growth rate of 5% and a steel consumption-GDP elasticity of 1.58 (finished steel) and 1.72 (crude steel). The elasticities are

derived from the relationship between GDP and steel consumption for 2002-2012. Note that the elasticities do not take into account other factors affecting steel

consumption.

Sources: OECD calculations based on GDP and consumption data from the International Monetary Fund and the World Steel Association.

Prospects for the Indonesian steel market

-A strategic industry in economic

development-

0

5000

10000

15000

20000

25000

Thousandtonnes

Steel consumption scenarios of future in Indonesia

Crude steel

Finished steel

Actual

Indonesia (2012)

Malaysia

Philippines

Thailand

Viet Nam

China

India

BrazilMexico

Russian Federation

Korea

Chinese Taipei

Czech Republic

Spain

Italy

Japan

Germany Canada

United States

France Netherlands

Australia

Indonesia (2025)

0

200

400

600

800

1000

1200

0 10000 20000 30000 40000 50000 60000 70000

kg

GDP per caita (USD current price)

Finished steel consumption per capita vs. GDP per capita (2012)

Macroeconomic indicators in Indonesia

(Quarterly and Monthly)

Sources: Badan Pusat Statistik for real GDP growth, consumer price index, industrial production index and trade. Bank Indonesia for BI rate and retail sales

index. Gaikindo for automotive production and sales.

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

I II III IV I II III IV I II III IV I II III IV I II III IV I II III

2008 2009 2010 2011 2012 2013

%Real GDP growth

GDP growth

5

5.5

6

6.5

7

7.5

8

8.5

9

9.5

10

09.1 4 7 10

10.1 4 7 10

11.1 4 7 10

12.1 4 7 10

13.1 4 7 10

% BI rate

BI rate

0

1

2

3

4

5

6

7

8

9

10

09.1 4 7 10

10.1 4 7 10

11.1 4 7 10

12.1 4 7 10

13.1 4 7 10

% Consumer price index

Consumer price index

90

95

100

105

110

115

120

10.1 3 5 7 9 11

11.1 3 5 7 9 11

12.1 3 5 7 9 11

13.1 3 5 7 9

2010 = 100 Industrial production index

Industrial production index

4000

6000

8000

10000

12000

14000

16000

18000

20000

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Million USD Trade

Exports

Imports

60

80

100

120

140

160

180

10.1 3 5 7 9 11

11.1 3 5 7 9 11

12.1 3 5 7 9 11

13.1 3 5 7 9

2010 = 100 Retail sales index

Retail sales index

0

20

40

60

80

100

120

09.1 4 7 10

10.1 4 7 10

11.1 4 7 10

12.1 4 7 10

13.1 4 7 10

Thousandunits

Automotive production

Automotive production

0

20

40

60

80

100

120

09.1 4 7 10

10.1 4 7 10

11.1 4 7 10

12.1 4 7 10

13.1 4 7 10

Thousandunits

Automotive sales

Automotive sales

Steel trade in Indonesia

(Monthly)

Source: ISSB Limited.

0

200

400

600

800

1000

1200

1400

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Thousandtonnes Total iron & steel imports

Total iron & steel imports

0

50

100

150

200

250

300

350

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Thousandtonnes Total iron & steel imports from major exporters (1)

China

Japan

Korea

Chinese Taipei

0

100

200

300

400

500

600

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Thousandtonnes Steel imports (Semi-finished products)

Imports (Semi-finished products)

0

50

100

150

200

250

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Thousandtonnes Steel imports (Long products)

Imports (Long products)

0

100

200

300

400

500

600

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Thousandtonnes Steel imports (Flat products)

Imports (Flat products)

0

50

100

150

200

250

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Thousandtonnes Steel imports (Pipes & Tubes)

Imports (Pipes & Tubes)

0

20

40

60

80

100

120

140

160

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Thousandtonnes Total iron & steel exports

Total iron & steel exports

0

50

100

150

200

250

300

350

09.1 4 7 10 10.1 4 7 10 11.1 4 7 10 12.1 4 7 10 13.1 4 7

Thousandtonnes Total iron & steel imports from major exporters (2)

Russian Federation

Ukraine

Steel demand

There was a significant growth in steel demand over the past decade.

Construction and automotive are playing an important role in steel demand.

Indonesia used to produce most of the products that it consumed. However, it has become an important net importer of steel.

Steel supply

Indonesia will soon have ASEAN’s first large-scale blast furnace. This should have significant impacts on the structure of steel supply and demand.

The country’s steel production has lagged compared with other ASEAN economies. However, it has the potential to boost its steel production.

Challenges and Future prospects

Protectionism has been on the rise in recent years.

Numerous factors are expected to support the country’s steel consumption.

The steel industry is one of the key industries of the Master Plan.

Summary of findings

Thank you for your attention