Indonesia’s expected 3.1% steel demand growth in 2020 to depend on infrastructure projects

Indonesia’s expected 3.1% steel demand growth in 2020 to depend on infrastructure projects

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The overall outlook for steel demand in Indonesia is positive and, taking into account the expected growth in spending for infrastructure, the country’s steel consumption is expected to increase by 3.1 percent in 2020. However, taking into account numerous uncertainties due to Covid-19, two scenarios have appeared for the development of the steel industry this year, according to the presentation made by Widodo Setiadharmaji, executive director of the Indonesian Iron and Steel Industry Association, during the SEAISI e-conference held last week.

Under the positive scenario, steel consumption in Indonesia is expected to increase by 3.1 percent from 15.9 million mt in 2019 to 16.4 million mt in 2020, while it will reach 17 million mt in 2021, according to Mr. Widodo. The main demand driver is predicted to remain infrastructure, the same as last year. The government of Indonesia will increase spending by 10.2 percent in 2020, with this growth rate more than two times bigger than the increases in investments in 2019. “It is estimated that steel demand from government infrastructure projects will be around 3 million mt,” Mr. Widodo said. But he also added that the realization of these projects is likely to be impacted by the Covid-19 pandemic. And, as a result, overall steel demand may post large declines.

Under the worst-case scenario, steel consumption in Indonesia may fall to slightly above 11 million mt in 2020 and will return to the 2019 level of about 15.9 million mt in 2021. This forecast is based on the experience from the crises in 2008 and 2015.

As SteelOrbis reported earlier, Indonesia is one of the bright spots in the ASEAN steel market. The country posted more than a five percent increase in demand in 2019 and both steel production and imports posted an increase. Overall production reached 10.9 million mt last year, up nine percent. At the same time, imports increased by 10.5 percent to 8.4 million mt with the largest part represented by flat product shipments, which went up by 12 percent over the year.

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