This report profiles Indonesia’s steel industry and analyzes market trends through H2 2013. The report also offers a market outlook and a review of the leading players in the sector (among them Krakatau Steel, Bakrie and Brothers, Gunawan Dianjaya Steel, and Jaya Pari Steel), and discusses Indonesia’s position as the ASEAN’s second-largest consumer of steel (in second place between Thailand and Vietnam).

Indonesia’s steel consumption grew at an impressive rate of 14.1% to 12.5mn metric tons in 2012 in line with the growth in domestic steel demand as well as the national economy. As the country with the largest economy and highest population in ASEAN, Indonesia’s share of steel consumption reached 21.3%, making it the second steel-consuming country in the region. But while steel consumption surged in 2012, the growth did not benefit local producers. Total steel production by steel mills in Indonesia in fact declined marginally by 0.1% to 5.4mn tons.

As local producers supply only about half of the country’s steel demand, Indonesia relies heavily on imported steel products to meet the increasing domestic demand. Total imports of iron and steel products jumped 30% in 2012 to a record high of 12.7mn tons. Imports of practically all iron and steel products increased. Imports of semi-finished products soared 54% to reach 3.8mn tons, while imports of sections and wire rods also recorded a similar increase, percentage-wise, to touch 1.1mn tons. Total export volume of iron and steel products dropped 25% to 1.0mn tons. The largest source countries for imports are Japan, China, and Russia. The year 2013 has been a challenging one for the domestic steel industry, with competition from cheap imports and fluctuation in the prices of steel and raw materials remaining a major area of concern for domestic steel producers.

Key Points:

• This report provides an overview of the market position and financial highlights for the leading domestic producers, including PT Krakatau Steel (Persero) Tbk (KRAS), PT Bakrie and Brothers Tbk (BNBR), PT Gunawan Dianjaya Steel Tbk (GDST), and PT Jaya Pari Steel Tbk (JPRS).

• Among the ASEAN countries, steel consumption in the Philippines, Indonesia and Vietnam saw double-digit growth rates of 17.6%, 14.1% and 13%, respectively.

• The country’s domestic steel production declined marginally by 0.1% y/y to 5.42mn tons in 2012. Bars and wire rods are the primary steel products and account for the largest annual production output of the industry.

•The gross domestic product (GDP) of the Indonesian iron and basic steel industry increased 6.2% year on year to IDR 9.0tn in September 2013.