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NEWS UPDATES 11 August 2009

Indonesian firms wary of steel dumping from China

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Indonesian steel makers have warned the government that global giant steelmaker China might dump its steel in Indonesia after the European Union decided July to impose duties on steel pipe imported from China, reported the Jakarta Post.

"The threat of a larger influx of steel imports into Indonesia is very clear because we only impose a 15 percent import duty on imported steel pipe as a protective measure," the Indonesian Iron and Steel Industry Association (IISIA) head of pipe cluster Untung Yusuf told The Jakarta Post recently.

"China will for sure start dumping its steel pipe production in Indonesia as it has done in the United States, because Indonesia is now the only open market left."

Dumping occurs when a manufacturer in one country exports its products to another country at a price below the one charged in its home country or below its production costs, while anti-dumping refers to measures that counter dumping practices, by imposing (additional) import duties.

Indonesia's steel imports, mostly from China, have jumped in the past two years and increased when demand started to slump in the United States - one of China's main markets for steel - as a result of the global economic turmoil.

The Indonesian government said last year that many so-called Chinese cargos containing steel that was ready to be shipped to the US, were promptly dispatched to other countries, including Indonesia, allegedly at a low price because of the slumping demand in the world's largest market.

According to the Central Statistics Agency (BPS), imports of iron and steel - as well as iron and steel products - amounted to $3.09 billion in the first half of this year, down 47.54 percent from the $5.89 billion recorded in the same period last year, a drop most likely caused by falling iron and steel prices.

Untung added steel imports accounted for 20 to 30 percent of the 6-million-ton annual domestic demand for steel.

In response to the threat, Trade Minister Mari Elka Pangestu said the Indonesian government remained "cautious". "We already have verification requirements in place as stated in the 2009 Trade Ministry terms and conditions for iron or steel imports. We're monitoring imports tightly," she said.

But Untung said verification requirements would not help much because they did not apply to steel imported by "the largest steel pipe consumers" - the oil and gas -- as well as the automotive sectors.

Steel pipe is commonly used in housing construction, oil and gas plants and the automotive industry. Trade officials from the EU's 27 member states agreed with steelmakers - including the world's largest by volume, ArcelorMittal - that punitive tariffs were required to protect them from the threat of underpriced Chinese imports, said the Wall Street Journal Asia on July 29.

The duties - ranging between 17.7 and 39.2 percent - are expected to take effect in October and to last for five years, the Journal said. Temporary duties have been applied since April.

Tan Ling, a manager at Chinese Hengyang Valin Steel Tube Co. that exports steel to the EU, said as quoted by the Journal: "If they impose the tax, we will lose the EU market". The company exports 5 to 10 percent of its products to the EU, said Tan.

She added her company would export more to the Middle East and Africa to compensate for losses.



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