Indonesia aims to lift scrap, lower billet imports

Indonesia is seeking to reduce its reliance on imported billet by increasing ferrous scrap imports and improving domestic steel output.

Government officials last week called for the relaxing of scrap import regulations during a meeting on the availability of steelmaking raw materials.

Indonesian steel production currently provides for 40pc of domestic steel demand, said minister of industry Agus Gummiwang Kartasasmita, while the industry could account for 70pc of Indonesia's steel consumption if capacity utilization rises. Kartasasmita said that scrap metal imports will have to rise to 9mn metric tonness in order to meet this objective.

President Joko Widodo also called for a review of regulations on scrap metal imports that would maintain environmental concerns.

Indonesian steelmakers were also encouraged to continue updating technology used in the steel manufacturing process to provide stiffer competition on quality and price to foreign steel.

Recent guideline changes to Indonesian import regulations classified scrap metal as waste, necessitating inspections at loading and unloading, as well as acquisition of additional permits.

Higher-yield and cleaner grades of scrap like plate and structural and busheling can pass inspection, but grades like HMS could encounter delays, said one US-based trader.

Indonesia steel production was estimated at 5.5mn t against imports of 11.7mn t, according to full-year 2018 data from international industry organization Worldsteel.

Indonesia's ferrous scrap imports have climbed steadily since 2007, barring off years in 2015 and 2016. The country imported 2.3mn t of ferrous scrap in 2019, with around 17pc sourced from Australia, 15pc coming from the UK and 11pc imported from the US, according to data from Global Trade Tracker.

Semi-finished steel product imports have also increased, rising from 2mn t in 2007 to a peak of 4.9mn t in 2016. UAE provided 22pc of semi-finished products, while Oman and Russia accounted for 17pc each.

In the short-term, steel producers are taking other measures to combat the glut of imports, with Krakatau Steel submitting an anti-dumping petition on Chinese hot-rolled coil on 18 February.

By Will Ehrhardt