Govt to protect country’s steel making industry

CILEGON. Minister for state enterprises Rini Soemarno said the government will protect the state owned steel maker PT Krakatau Steel as other countries do for their steel making industry. The protection is against large imports of steel products, Rini said here on Tuesday.

"We do as other do slapping anti dumping import duties," she said when visiting the publicly traded company in Cilegon, Banten.

She said anti dumping import duty would be imposed to prevent large import of steel by Batam where there are shipbuilding industries that need large supply of steel.

She said Krakatau Steel is a base industrial company that should be supported and protected to be able to grow efficiently.

"Krakatau Steel as a base industrial company produces various steel products needed by downstream industries, therefore, the government is set to support," Rini said after a meeting with the company leaders.

President director of PT Krakatau Steel Irvan K Hakim said at the meeting he asked the minister for protection against external pressure with the falling steel prices and influx of steel imports.

Irvan said in the period of 2011 - 2014, the steel prices in the world market fell as a result of large supply from China reaching 51 million tons in 2014.

"The large supply resulted in a sharp fall in steel prices from US$705 per ton to US$536 per ton in 2014," he said.

The price of steel in the first quarter of 2015 continued to shrink to US$442 per ton in the average.

Irvan said with the falling price, the imports of steel surged from 3.4 million tons in 2009, to 8.2 million tons in 2013 or an increase of more than 100 percent .

"Whereas, the domestic steel requirement totaled only 12.7 million tons in 2013 . Imports were almost 64.5 percent of the domestic consumption," he said.

He said the large imports were as a result of the low import duties, Lower than the rates imposed by other countries.

He said the import duty on steel is only 5 percent as against Malaysia's 20 percent plus anti dumping import duty of 24 percent and India's 7.5 percent to be raised to 15 percent soon.

Thailand imposes a 5 percent import duty with anit dumping import duty of up to 33 percent.

Irvan said under the ASEAN-China FTA , ASEAN-Korea FTA and IJEPA the import duty is zero minimum .

China also gives incentives for its steel making industry in the form of tax rebate of 9 to 13 percent that Chinese steel products are much cheaper and could easily enter the world market including Indonesia.

Irvan said the decline in the price of steel products has bad impact on the performance of the state steel maker despite an increase in sales.

He aaid the company has taken steps to improve efficiency in facing the unfavorable condition in the world market such as cutting labor cost, optimization in the operation of factory and improving synergy with Krakatau Posco.

Kramatau Posco is a joint venture between the state company and South Korea's steel maker POSCO.

Irvan said Krakatau Steel will carry out a number of projects such as blast furnace complex , operation of project of 120 MW combined power plant, conversion of gas fired into 2x80 MW coal fired steam generator and substitution of natural gas with waste gas from the blast furnace.

He said the presence of combined cycle power plant (CCPP) will reduce cost for power below the PLN price to 6.5 US cents per kWh, and utilization of waste gas will reduce gas consumption 8 mmscfd or equivalent to US$8 million per year.