Indonesian Steel Industry Boosted by China Tax

JAKARTA ~ Indonesia will increase production of semi-finished feed stock to meet demand from its steel industry following China’s decision to impose a tax on exports of such items, an official said.

Most Indonesian steel producers currently import feed stock such as billets from China as they are cheaper than those made by state-owned PT Krakatau Steel, Anshari Bukhari, director general of metal, textile machinery and multifarious industries, said.

China’s decision last November to impose a tax on the export of feed stock such as billets, used to produce items such as girders for the construction industry, would spur Indonesia to increase its own capacity, Bukhari said.

“We are anticipating (the Chinese tax) by spurring the development of our own steel industry feed-stock production capability,” the official Antara news agency quoted him as saying on Tuesday.

Indonesian billet producers were working at around half production capacity due to the cheaper imports but Bukhari said China’s move could now spur development of the domestic industry.

“The Chinese policy is expected to increase utilization of the domestic industry’s production capacity,” he said.

The government was also reviewing its policy on exports of iron ore following China’s imposition of an export tax on other materials produced with ore imported from Indonesia, he said.

“Vice President Yusuf Kalla has asked for iron ore processing at home. We export almost two million tons of iron ore to China at a price of US$20 to $30 per ton so that the price of the product is expensive,” he said.

Bukhari admitted that any move to tax exports of iron ore would have a mixed reception.

“The steel industry supports such a policy but the mining industry will possibly not support it,” he said.

China, the world’s largest steel producer, is heavily dependent on imports of iron ore to feed its huge demand for steel in a booming economy. Brazil and Australia are its main suppliers.

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