On June 25, Indonesia Desin Steel phase 1 expansion No. 2 shaft furnace held the ignition oven ceremony, marking the project No. 2 shaft furnace officially put into operation. At present, Indonesia's Desin is China's largest overseas investment and construction of a single steel enterprise, has become a steel pearl on the "Belt and Road". In recent years, the construction of steel projects in Indonesia has been in full swing. Among ASEAN member states, Indonesia has the largest land area, the largest population and the highest GDP, accounting for more than 1/3 of ASEAN's total. According to data released by the Southeast Asian Iron and Steel Association, in 2023, Indonesia's gross domestic product is expected to grow by 5.3% year-on-year, and apparent steel consumption is expected to increase by 5% year-on-year to 17.4 million tons. The forecast data of the Indonesian Iron and Steel Association is more optimistic, predicting that the apparent consumption of steel in 2023 will increase by 7% year-on-year to 17.9 million tons.

Indonesia's GDP grew at an average annual rate of 5.46% from 2004 to 2019, with negative growth of -2.1% in 2020. At present, Indonesia's economy is slowly recovering and has a lot of growth potential in several aspects. The country has a large young population with a median age of 29.7 years. This means that the country has a large domestic market base and a demographic dividend. In addition, Indonesia's abundant natural resources and growth-oriented policies, which focus on industrial development and investment in infrastructure construction, attract a large amount of foreign investment.

The landing of new production capacity has boosted the self-sufficiency rate of steel

From 2010 to 2019, Indonesia's steel demand began to accelerate. The country's steel demand grew at a compound annual growth rate of 4.82% from 2000 to 2009, rising rapidly to 6.63% from 2010 to 2019. The country's steel demand doubled between 2009 and 2018. The rapid growth of steel demand in Indonesia is due to its strong infrastructure development momentum.

In the past, Indonesia's steel production was far below steel demand and had to be met by imports. In recent years, with the arrival of a series of new capacity, Indonesia's steel production has steadily increased, helping its steel self-sufficiency rate to exceed 45% in 2019. Between 2000 and 2020, Indonesia's annual steel capacity expanded from 5.9 million tons to 19.6 million tons.

It is worth mentioning that Indonesia has large nickel reserves, and Chinese enterprises (mainly Qingshan Group and Delong Group) have made a lot of investment in Indonesia around stainless steel manufacturing. At present, 7.7 million tons of steel capacity in Indonesia uses the blast-furnace converter (BOF) process and the rest is the electric furnace (EAF) process. At present, the steel mills using the blast-converter process in Indonesia include Krakatau POSCO (a joint venture steel plant between PoSCO and local steel companies in Indonesia) and the Indonesian Desin project supporting steel mills. Indonesia currently has a number of capacity expansion plans (including stainless steel capacity), and all of the new capacity will be in the blast-converter process.

Rich in natural resources but still dependent on imports

Indonesia is rich in natural resources, ranking first in the world in nickel reserves and sixth in coal reserves. The country's rich nickel deposits have attracted foreign investment in stainless steel manufacturing and batteries for electric vehicles. Indonesia's coal is mainly thermal coal, metallurgical coal production is very low, need to rely on imports. With the expansion of the crude steel capacity of the blast-converter process and the stagnation of domestic metallurgical coal production, Indonesia will become increasingly dependent on imported coal.

Indonesia once led the ASEAN in iron ore production. Iron ore production peaked in 2013, after which the government imposed an export ban on unprocessed minerals and gradually increased the export duty on iron concentrate (from 20% in 2014 to 60% in 2017), resulting in a steady decline in iron ore production since 2014. In 2014, Indonesia went from being a net exporter of iron ore to a net importer with the commissioning of the country's first blast-converter process crude steel capacity project. At present, Indonesia mainly imports iron ore from Brazil, Australia and other countries.

It can be seen that Indonesia's steel demand has a bright future, and the country will become one of the important factors driving the growth of steel demand in the ASEAN region. However, there are also some uncertainties in the country's development, such as financing problems affecting the implementation of the "capital relocation plan" and whether the next government can continue the momentum of infrastructure construction started by the current president Jokowi.

The above content is excerpted from：https://www.csm.org.cn/art/2023/7/14/art_6296_345367.html