Raise tariffs on Chinese steel, Indonesian businesses urge govt

Krakatau Steel workers protesting last week outside their plant in Cilegon, Indonesia, against the company's plans for a 30 per cent cut in the workforce. PHOTO: REUTERS
Krakatau Steel workers protesting last week outside their plant in Cilegon, Indonesia, against the company's plans for a 30 per cent cut in the workforce. PHOTO: REUTERS

JAKARTA • Indonesian business groups want the government to raise tariffs on Chinese steel to rein in cheap imports, as the South-east Asian country's top steel producer said its restructuring would result in large layoffs.

Thousands of workers at state-controlled Krakatau Steel protested last week near a production plant in Cilegon, on the western coast of Java, after it announced plans for a 30 per cent cut in its workforce of 6,264 in stages through next year, local media said.

The firm is also selling non-core assets and spinning off some units to boost its financial condition.

The industry turmoil comes despite a boom in infrastructure investment by the government in the past few years, with business groups blaming imported steel for the pressure they are facing.

"For us, the most important thing is to protect domestic industry, by putting on high tariffs," Mr Didi Aulia, head of construction business at Indonesia's chamber of commerce, said on Thursday.

The Indonesian Iron & Steel Association said the bulk of imports came from China, adding that the Beijing government gave steelmakers tax incentives to boost their competitiveness.

"Once (the steel) arrives here, it comes in without paying import tax," said association official Teguh Sarwono, 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 per cent was absorbed by the market, he told Reuters. Half of 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 has accused foreign producers of altering product specifications to avoid them.

The government could penalise goods produced through unfair trade practices, said deputy coordinating minister of economic affairs Bambang Adi Winarso, but he also questioned the efficiency of the domestic industry.

"If there is no demand, there will be no imports," he said. "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, financial data from Refinitiv's Eikon shows.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 13, 2019, with the headline 'Raise tariffs on Chinese steel, Indonesian businesses urge govt'. Print Edition | Subscribe