Iron and Steel comodities in the World & Indonesia and the

challenges of the national steel industry going forward.

Basically, various efforts have been made to develop Esia's national steel industry,
among others by improving old and unproductive, limited scale of production, low efficiency,
and uneven and invisible industrial distribution. In addition, the external side can be caused by
uncompetitive tax rates, dumping policies, energy and electricity crises, plant installed capacity
of 53% in 2004 import hangers are still high, price increases adi 56.3% (2006). Besides that
was done international raw material that continues to skyrocket, labor force of 74,276 people
at low infrastructure development, including to 74,871 (2005) and 76,272 people ). However,
various government efforts the implementation of the ASEAN-China FTA is actually It is a
threat to the national steel industry but not yet the best solution to make Indonesia.

At the beginning of 2010, Indonesia's steel production was still very dependent on
imported raw materials, so that the competitiveness of the national steel industry was even
more eroded due to the swelling of production costs, which was accompanied by ASEAN-
China market liberalization (ACFTA) and energy supply deficits. According to the Director of
the Metal Industry Directorate General of the Textile and Multifarious Metal Industries of the
Ministry of Industry I Putu Suryawirawan stated that in early 2010 about 80% of the cost of
steel production came from imported raw materials. He asserted that "almost all of the steel
raw material requirements are in the form of basic materials, such as iron ore and raw steel,
namely slabs and billets, most of which are still imported at market prices," Putu said at the
Industrial Policy Deepening Workshop for Journalists, in early March 2010.
Furthermore, the dependence on imported raw materials causes downstream products
that are processed from slabs (raw materials for sheet steel) and billets (raw material for spike
steel) to compete with imported steel products. Based on the Ministry of Industry's records, the
volume of steel base material exports in 2007 reached 1.85 million tons valued at US $ 657.6
million. The imports jumped to 2.7 million tons valued at US $ 1.47 billion in 2008 and briefly
shrank in 2009 due to the global crisis to 1.89 million tons worth US $ 639.7 million.
Meanwhile, the value of raw steel imports in 2007 reached 2 million tons or US $ 1.1 billion.
In 2008 the value jumped to US $ 2.1 billion or 2.6 million tons. However, imports briefly
shrank in 2009 to 2.1 million tons valued at US $ 933.2 million. Ironically, the upstream
industry actually imports almost 100% of the important raw material needs at high prices. This
should mean that if the industry can obtain cheaper raw materials, competitiveness can
certainly be improved. For example, one way is to increase investment.
In addition, in early 2010, the steel industry was faced with the impact of ACFTA. This
cooperation could further depress the competitiveness of downstream products, which are
mostly based on local markets. The reason is that China still imposes export subsidies for a
number of manufacturing sectors through the export value added tax rebate scheme, meaning;
"This export subsidy scheme can actually erode the competitiveness of the national steel
industry. On the internal side, the decline in competitiveness is also triggered by limited energy
supply, such as gas and electricity. The supply of gas and electricity for the upstream steel
industry in 2010 is threatened to decrease more than half of the total needs of this industry.
The strategies to survive from the challanges is considering the fundamental weakness
that occurs in the Indonesian national steel industry is that there are still limited production of
raw materials both in quality and quantity, it is necessary to carry out a policy strategy that has
more backward linkage to the related base metal industry. For example, the presence of iron
and steel base metal industries, such as non-ferrous metals (aluminum, copper and nickel).
There are several policy strategies that must be carried out related to the basic metal industry
namely; (a) developing non-ferrous metal industry by utilizing local potentials and resources
to increase added value in the country. (b) encouraging the growth of upstream and downstream
non ferro metal industries between, (c) encouraging increased utility in existing industries and
followed by increasing production capacity and quality through the application of national and
international standardization, and (d) facilitating licensing to obtain power development (KP)
for new investors who will build the steel industry in Indonesia.