Singapore — Indonesia's steel consumption is expected to rise 50.3% from 15.1 million mt in 2018 to 22.7 million mt in 2024, data from the Indonesian Iron and Steel Industry Association showed, amid demand from the construction and automotive sectors.
Most of the demand will come from the country's construction sector which accounts for about 78% of steel consumption annually. About 40% is used in infrastructure work while the other 38% goes into non-infrastructure work.
"Economic growth is still mainly sustained by manufacturing industry and construction," the association said this week. Based on a national economic growth rate of 5.3%, domestic steel consumption is expected to grow by 7%.
In 2020, Indonesia's construction sector is projected to grow by 5.72% while economic growth is estimated at 5.3%-5.6%, data from the country's Coordinating Ministry for Economic Affairs showed.
"The construction sector growth in 2020 is still in above of the average economic growth," IISIA said, which will cause capacity utilization to increase especially for long steel products due to infrastructure development.
Over the first half of 2019, demand for long steel products rose 9.7% year on year to 2.9 million mt as local production grew 11.3% to 2 million mt, the South East Asia Iron and Steel Institute said. Amid the higher output, H1 long steel imports fell 3.4% to about 1 million mt while exports halved to 119,677 mt due to higher domestic demand.
"2020 is (a) continuation of infrastructure development that has been carried out to support economic expansion and inclusive growth in Indonesia," Yeoh Wee Jin, secretary general of SEAISI said at its 2019 ASEAN Iron and Steel Sustainability Forum held in Jakarta over November 25-27.
Indonesia's infrastructure budget is expected to be Rupiah 419.2 trillion ($29.74 billion) in 2020 versus Rupiah 399.7 trillion in 2019, its finance ministry said. The Institute for Development of Economics and Finance's projections put the infrastructure budget at Rupiah 530.7 trillion in 2024.
In addition to construction, Indonesia's automotive sector will also boost steel demand too "as many of the world's automakers have (re)opened manufacturing plants or expanded production capacity," SEAISI said.
Indonesia is the largest automobile market in ASEAN with annual vehicle sales of 1.15 million units in 2018.
ASEAN recorded sales of about 3.16 million units in 2018 and expects this to grow to 4.49 million units in 2026.
South Korea's Hyundai Motor Co. signed a memorandum of understanding with the Indonesian government on November 26 to a build a $1.55 billion plant in Kota Deltamas, east of Jakarta.
The new plant is expected to start commercial operations over the second half of 2021 with an initial vehicle production capacity of 150,000 units/year that will be raised to 250,000 units/year eventually.
Hyundai Motor's investment in the Indonesian plant will be spread from 2019 till 2030.
-- Clement Choo, email@example.com
-- Ashima Tyagi, firstname.lastname@example.org
-- Edited by Debiprasad Nayak, email@example.com