Indonesia’s steel industry is a rapidly growing sector, with opportunities fueled by government policies, increasing domestic demand, and expanding exports. For foreign businesses seeking to invest, this sector offers vast potential within one of Southeast Asia’s largest economies.
Indonesia Steel Industry Outlook
The steel industry in Indonesia has demonstrated resilience, particularly during the challenging years of the COVID-19 pandemic. In 2021, the sector grew by 9.82% in the third quarter, according to Statistics Indonesia (BPS). The industry’s export value reached $19.6 billion in November 2021, generating $6.1 billion in profits.
Indonesia ranks as the largest steel producer in Southeast Asia and 16th globally as of 2022. Construction dominates steel consumption, accounting for 78% of usage, with the automotive sector following at 8%. Despite its significant production capabilities, Indonesia imports nearly half of its steel to meet domestic demand, consuming over 13 million tons annually.
Also read: Major Industries in Indonesia (Based on Contribution to GDP)
Steel Business Opportunities in Indonesia
With a large market potential, the steel industry in Indonesia provides various opportunities, including:
Construction Industry
Contributing 11.5% to Indonesia’s GDP, construction industry is the third-largest contributor to the economy. The demand for steel in this sector is projected to grow by 50% within the next three years.
Automotive Industry
With a growing automotive sector, Indonesia uses 8% of its steel in manufacturing vehicles. Steel ensures vehicle safety and strength, creating opportunities for suppliers of automotive-grade steel.
Export Markets
Indonesia’s steel exports rank as the third-largest export commodity between 2020 and 2022. Downstream steel products are a key growth area, driven by government incentives and rising global demand.
Also read: Indonesia’s Positive Investment List: Opportunities for Investors
Indonesia Steel Business Regulation
The Indonesian government plays a crucial role in shaping the steel industry through:
- Import Substitution Programs: Reducing imports of steel products to promote local production.
- Mandatory Standards (SNI): Ensuring quality in domestic steel products to protect consumers.
- Incentives for Investment: Encouraging investments in both upstream and downstream steel sectors.
To address challenges such as steel import dependency and unfair trade practices, the government has implemented tighter import license regulations and promoted programs like P3DN, which prioritizes the use of domestic products.
Also read: Indonesia Investment Incentives: Government Support for Foreign Businesses
Examples of Steel Companies in Indonesia
The following are some examples of steel companies in Indonesia:
- Krakatau Steel: Indonesia’s largest integrated steel producer, pivotal in both upstream and downstream production.
- Gunung Steel Group: A key player in construction-grade steel products.
- Delong Steel: A significant foreign investment in Indonesia’s steel sector, focusing on downstream production.
How to Start a Steel Company in Indonesia
Starting a steel business in Indonesia involves:
- Market Research: Assess demand, competition, and export opportunities.
- Legal Compliance: Register the company with Indonesia’s Investment Coordinating Board (BKPM) and adhere to local regulations.
- Partnering Locally: Collaborate with Indonesian companies to navigate the regulatory landscape efficiently.
- Utilize Incentives: Leverage government incentives for establishing manufacturing facilities.
Indonesia’s steel industry presents a dynamic investment landscape with opportunities in construction, automotive, and export markets. By aligning with government policies and leveraging local partnerships, foreign businesses can establish a strong presence in this thriving sector.
If you are considering starting a steel business in Indonesia, there are a number of resources and support services available to help you get started.
InvestinAsia is among the companies that specialize in aiding you with Indonesia company registration. We boast a team of seasoned experts who can guide you throughout the process of:
- Foreign company / PMA registration in Indonesia
- Indonesia representative office registration
- PT PMDN Set Up
- Virtual office setup in Indonesia
- Business registration number in Indonesia
- Indonesian Business Licenses
- Indonesia Trademark Registration
If you are interested in starting a business in Indonesia, you can start by contacting us for FREE consultation.
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