Indonesian business groups want the government to hike tariffs on Chinese steel to rein in cheap imports, as the Southeast Asian country’s top steel producer said its restructuring would bring large layoffs.
Thousands of workers at state-controlled Krakatau Steel protested last week near a production facility in Cilegon on the western coast of Java, after it announced plans for a 30% cut in its workforce of 6,264 in stages through 2020, Indonesian media said.
Apart from the job cuts, Krakatau Steel said it would sell non-core assets and spin off some units to improve its financial condition.
The industry turmoil comes despite a boom in infrastructure investment by the government in the last few years, with business groups blaming imported steel as the main factor responsible for the pressure.
“For us, the most important thing is to protect domestic industry so we don’t die, by putting on high tariffs,” Didi Aulia, head of construction business at Indonesia’s chamber of commerce said on Thursday.
The Indonesian Iron & Steel Association (IISIA) said the bulk of imports came from China, adding that Beijing gave steel makers tax incentives to boost their competitiveness.
“Once (the steel) arrives here, it comes in without paying import tax,” said Teguh Sarwono, an association official who is also the commercial director of Krakatau Wajatama, a Krakatau Steel subsidiary.
Although Indonesia’s domestic industry produces 17 million tonnes of steel a year, only 57% was absorbed by the market, Sarwono told Reuters. Half the domestic demand for 20.3 million tonnes is supplied from abroad.
The quality of imports was low, but “For contractors here, what matters most is they’re cheap,” he said, adding that the use of such steel made buildings or infrastructure more vulnerable to the archipelago’s frequent earthquakes.
Indonesia has levied anti-dumping duties on several types of steel from China and other countries, but the association accused foreign producers of altering product specifications to avoid them.
The government could penalise goods produced through unfair trade practices, said Bambang Adi Winarso, deputy coordinating minister of economic affairs, but he questioned how efficient domestic industry is.
“If there is no demand, there will be no imports,” Winarso added. “But if the problem is pricing, it could be related to domestic inefficiency that makes us non-competitive.”
Krakatau Steel has racked up losses each year since 2012, data from Refinitiv’s Eikon shows. In the first quarter, the company reported a net loss of $62.3 million, a jump from a loss of $4.9 million in the corresponding 2018 period.
Source: Reuters (Additional reporting by Bernadette Christina Munthe Writing by Gayatri Suroyo) / Hellenic Shipping News