2008-2009 DATA CONSULT. All rights reserved.
INDONESIAN COMMERCIAL NEWSLETTER
October 2011

THE MARKET PROSPECT OF HOT ROLLED PLATE (HRP) IN INDONESIA


Background

There has been a structural shift in demand of steel products during the last decade. The intensity of demand has shifted in favor of emerging markets including Indonesia. This is mainly due to the fact that GDP growth in these countries is substantially high in comparison to developed nations. 

The ongoing debt crisis in Europe had no significant impact on the Asian steel market but eventually depressed international prices. Nonetheless, steel demand in Indonesia remained strong last year and is expected to continue growing in 2012, triggered by the country's economic growth which is estimated to reach 6.5% this year. The demand growth is derived mainly from significant expansion of steel related sectors such as construction and automotive industry.

Hot rolled plate ( HRP) , one of strategic intermediate steel products,  has experienced   a significant market growth in Indonesia in the last four years. This is  due to strong growth of demand from several sectors such as power generation and distribution, heavy equipment industry, shipbuilding and steel fabrications and structures.

The market size of HRP ( of 20 mm thickness and higher) has developed steadily from about 273 thousand tons in 2005 to 351 thousand tons in 2008, 445 thousand tons in 2009 and rose sharply to 703 thousand tons in 2010. The substantial growth in 2010 was driven by the strong recovery in various business sectors following the global economic crisis in 2008-2009. Although still importing HRP for certain types, Indonesia  has been able to  export HRP   with an  increasing volume of export over the last three years.

This report will discuss the general overview of Hot Rolled Plate (HRP) market in Indonesia with special emphasize on HRP of 20 mm and higher thickness which are used extensively in steel structure industry, steel fabrication, heavy equipment (yellow goods), shipbuilding industry, boiler/ pressure vessels/ power generation equipment etc.

HRP Production Process

Hot Rolled Plate (HRP) is produced from steel slab heated in a reheating furnace and after that it is made thinner in the hot strip mill (HSM) or reversing mill before being cut to meet the desired size. In reversing mill, the thicknesses of slabs are reduced to form plates with thickness ranging from 6 mm to 80 mm. 

Generally the technologies used in hot rolled plate factories in Indonesia have no certain specifications.  They are all conventional technologies.  Most HR plate producers in the country use old machines more than 20 years in age with the exception of the machineries of PT Gunung Raja Paksi (GRP), which just started operation in 2000.  Even GRP uses machines which have been reconditioned from Switzerland.

  There are two processes of producing HR plate in the country:
"        The process used by PT Krakatau Steel (KS), is    "hot strip mill tandem"  and stand continually.  PT KS has 6 units of stand. PT KS produces HRP using slabs produced from its slab plant using continuous casting machines(CCM)
"        The process used by other producers (PT Gunawan Dianjaya Steel (GDS), PT Jaya Pari Steel (JPS) and PT Gunung Raja Paksi (GRP) is using reversing mill to reduce the thickness of slab in the  process of high stand mills. Most of slabs are imported from several countries.

In PT GDS ( Gunawan Dianjaya Steel), the production process follows the following steps
"        Slabs procurement : Slabs imported from overseas .
"        Slabs Cutting : Slabs cut in accordance with plate order size.
"        Inspection: Cutting results checked before further process.
"        Reheating Furnace : Slabs cut heated in the furnace up to standard temperature, in accordance with quality and size.
"        Descaler : Smoldering Slabs cleaned with crust cleaning machine to remove dirt from previous process.
"        3-High Roughing & Finishing Mill : Slabs milled with 3-High Reversing Roughing & Finishing Machine.
"        Hot Leveller : To ensure flatness and plate quality, grader surface plate is used.
"        Dividing Shear : Extended Plate because previous process, cut shorter using divisor
"        Cooling Bed: Cooling bed helps hot plate cool naturally to the ambient temperature.
"        Inspection :Physical aspect of steel plate carefully examines both the top and bottom part.
"        Plate Cutting :Plate cuts pursuant to customer's order. If plate thickness is equal or more than 15 mm, flame cutting is used. Flame cutting is welding cutting that used mixture of LPG and oxygen. But, if its thickness less than 15 mm, mechanized side shears is used.
"        Stenciled : All plates are stenciled at the top part.
"        Inspection: Piece of plate is tested in the laboratory.
"        Storage: Finished plate store and ready to send.
"        Shipment :Quality steel plates ready to send to customer.

Domestic industry : industry players have not changed

Over the last ten years the country has only 4 producers of HRP with a total production capacity of 2,060,000 tons in 2011.  PT Krakatau Steel (PT KS), the state owned integrated steel company, is the oldest HRP producer which also produces HRC (Hot Rolled Coil). Three other companies producing HRP in Indonesia are PT Gunawan Dian Jaya Steel (PT GDS), Jaya Pari Steel (PT JPS) and Gunung  Raja Paksi ( PT GRP).

PT KS, has an integrated steel production facilities include iron making facilities, 10 EAF steel making facilities, five continuous casting facilities and six rolling mills comprise a hot strip mills, cold rolling mill, a wire rod mill, a bar mill, a section mill and a pipe mill. 

Started operation in 1983, PT KS's hot strip mill applied German technology Siemag Aktingesselschaft (now SMS Siemag) and had an initial capacity of 1,000,000 tons. Between 1993 - 2004, the company conducted modernization projects to increase the production capacity of the hot strip mill to 2,000,000 tons per year, through the installation of a reheating furnace, a finishing coiler, a sizing press and roughing mill with higher motor capacity. In 2005, the company installed a new device for the finishing mill and modernized the water descaler facility.  Out of the production capacity of 2,000,000 tons per year, the company's hot strip mill produced 1,602,295 metric tons of HRC in 2009. Currently the companies hot strip mill consist of: 2 units of reheating furnace, 1 unit of roughing stand six unit of down coiler and sizing press.

In May 2011, PT KS completed the capacity expansion of its  hot strip mill to 2,400,000 tons per year through  modernization of their reheating furnaces, replacement of old electrical equipment and automation system. Installation of modern technologies for finishing mills, laminar cooling automation and microstructure monitoring system and upgrading of the existing roll shops.  In addition to modernization plan, the company will develop a new plant for producing HRC. With this new plant, the production capacity of the company will be 3,500,000 tons per year.

PT KS produces plain carbon and also micro-alloyed steel which could be used for many applications, from general or commercial quality to special quality, such as general steel structures, automotive frames, piles, heavy equipment components, general fabrications, general pipes and tubes, pipe and tubes for line pipes and casing, gas cylinders, weathering corrosion resistance applications, pressure vessels, boilers, and ship building. The plates' size is 1.8 to 25 mm in thickness and 600 - 2060 mm in width.

Hot rolled plates produced by PT KS are used mainly by ship building, steel structure and pipe manufacturing industries. Their products have meet international standards such as American Petroleum Institute (API) specially for oil and gas industry, and American Society Testing Material (ASTM), British Standard (BS), British Standard Europe Norm and Japan industrial standards (JIS).

Located in Surabaya, East Java, and PT Gunawan Dianjaya Steel  (PT GDS) started operation in 1991 and presently has an annual capacity of 350,000 tons a year. The main machineries of the company consist of 4 high reversing roughing and finishing of UNITED brand made in USA. The company uses material entirely from imports. Its sister company, PT Jaya Pari Steel (PT JPS)  also produce HRP with a total production capacity of 100,000 tons. PT JPS is a publicly listed company. PT GDS and PT JPS have no steel melting facilities. 
PT Gunawan Dian Jaya Steel (GDS)  is a foreign investment (PMA) company with its plant located in Surabaya on a 20 hectare plot of land. The company's products have also met various industrial standards for HRP such as ASTM, DIN, and JIS.  PT GDS is affiliated with PT Jaya Pari Steel (JPS), another producer of HRP.

GDS products are divided into three, based on the user designations

a.        Steel plates for General Use
"        Low carbon Structural Steel Plates
"        High Strength Low Alloy Structural Steel Plates
b.        Steel plates for boilers and pressure vessels
c.        Steel plates for ship building
"        Hull Structural Steel Plates (Mild Steels)
"        High Strength Hull Structural Steel Plates (High Tensile Steels)

Dimension and Shape of  PT GDS products

GDS steel plates meet the following tolerance requirements specification for the shape and dimension, but other specifications depend on negotiation.
"        Basic Weight: 7,85 kg/mm/m2 under JIS G3193.
"        Foot (12in): 304.80 mm
"        Inch : 25.40 mm
"        Max. Weight of one GDS Steel Plate : 7,400 Kgs

Products of PT GDS have been used by shipbuilding companies like PT Kodja Bahari, PT PAL Indonesia, PT Dok Perkapalan Surabaya, Jurong Shipyard Pte Ltd., Keppel Shipyard PTE. Ltd. Among the construction companies which use PT GDS's products are PT Adhi Karya, PT Cigading Habeam Center, PT Inti Karya Persada Tehnik and  PT JFE Shoji.

PT Gunung Raja Paksi (PT GRP) , is relatively a new comer in the industry as it started production only in 2000, while other companies have been in operation more than 20 years. PT. Gunung Raja Paksi commissioned its first hot rolled steel plate in the last quarter of the year 2000. By the last quarter of the year 2001, their mill reached an operating level of 82% of the capacity.

PT GRP has an advantage over other  two private HRP makers since it has steel melting facility reducing its dependency on import for feed stock. PT. Gunung Raja Paksi  is one of the few mills that are designed to produce both plates and coil for their customers. This company operates plate service center producing angle, flat bar, rectangular section, welded beams etc, and forming service center producing bridge and floor deck, pipes and tubes, roof sheeting etc. The plate service center is equipped with shape, bending, drilling, punching, shearing and stamping machines.

PT GRP produces wide ranges of plate products i.e. angle(CF), bridge deck, floor deck, rectangular pipe, roof & wall sheeting, ERW pipe, square pipe, etc.

PT GRP has also an advantage in its product as it produces steel plates wider than 3 m. PT GRP belongs to Gunung Steel group, a group specializing in steel business including steel structure and section industry, hot dip galvanizing business, and pre-engineered building industry. PT GRP presently operates at about 90% of its production capacity.

PT GRP has the largest capacity among existing producers. This company has secured certificates of Indonesia grade A (KI) classification, American Bureau of Shipping(grade A), Lloyds register of Shipping  (LT grade A).Its steel structure/ fabricated high tensile steel plate have the standards of JIS, BS, Din  and SNI.  

In 2010, PT Gunung Raja Paksi (GRP) just completed the expansion of their production facilities. Therefore, the company's production capacity is now 960,000 tons.

PT GRP and PT GDS are two companies among existing producers which are able to produce HRP with a thickness of 100 mm and more. The two other companies, i.e. PT Jaya Pari Steel and PT Krakatau Steel produce HRP of 25 mm and less.

HRP production grew 50% in 2010 but slowe4r in 2011

The production of HR plates has experienced an encouraging growth in 2010, as its total production rose almost 50% from only 1,284,000 tons in 2009 to 1,892,000 tons in 2010.  This growth was boosted by increasing demand of this type of materials particularly from power sector, shipbuilding and steel fabrication works. It is reported that production of shipbuilding industry has increased at least by 20% in 2010.   In the meantime rising demand from power sector is closely connected with the development of 10,000 MW power generation plant under "crash program" which needs supporting facilities including transmission, distribution and substation networks.

As indicated by the following table, PT GRP dominated the production of HRP contributing almost 50% of the total national productions.  PT KS is the second largest producer of HRP with its production rose from 360,000 tons in 2009 to 600,000 tons in 2010.

The capacity utilization rate in HRP industry is presently quite high namely around 90% due to various factors mainly development of market demand driven by development of power generation and distribution, shipbuilding industry, steel fabricating industry etc.

The above table is the production for   all size of HRP which is dominated by thickness of less than 20 mm.  As presented by the following table, domestic production of HRP is dominated by HRP   of less than 20 mm thickness. The other major size is the category of 20> 30 mm thickness. The two category of sizes contributed around 78% to the total national productions in 2010.

As indicated by the above table, production of HRP of 20 mm thickness and higher was around 43-45% of total HRP production in 2009 and 2010

The following table summarize the production of HRP by category of 20 mm thickness and higher as compared to those less than 20 mm thickness.

Export market becoming attractive

Despite rising domestic demand, existing manufacturers of HRP have also been able to export a part of their productions. PT GRP and PT Gunawan Dianjaya Steel are quite successful in penetrating the export market.  Currently around 40% of production of PT GRP is exported, while PT Gunawan Dianjaya is able to export around 30% of their production. PT GRP exports their products particularly to Singapore, Australia, Malaysia, Saudi Arabia and UK. Their buyers include United Steel International (Arab), Suka Alumex Investment (Singapore), CMC (Australia) and Dion Acier (UK)

PT GDS also exports its products mainly to neighboring countries such as Singapore, Malaysia. Their export customers include Ann Joo Metal Sdn Bhd, Almech Steel, Tyssenkrupp Manex Asia, Hoe Seng Huat, Kian Bee holdings, and One Metal resources.

In the meantime, PT KS exported its products namely to Croft Steel Pty. Ltd. (Australia) and Eurosteel (UK).

Imports of HRP  fluctuated

The domestic production of hot rolled plates still falls short of requirement in the country. Import, therefore are still needed. Imports are dominated by type measuring > 10 mm thickness and of 4.75 mm - 10.00 mm thickness.

Of the above statistics, imports of HRP of 20 mm thickness and more accounted for only about 30-37% of the total.  In 2009, imports of HRP of 20 mm thickness and more totaled around 28.1 thousand tons with a value of around US$ 35.7 million.


Japan is the largest supplier of HRP of 20mm thickness and higher to the Indonesian market, followed by China and Korea.  Imports from Japan are particularly done by industrial users consists mainly of Japanese joint venture companies in Indonesia.

Importers are mainly industrial users

Importers of HRP consist mainly of industrial users and only a small portion is traders and logistic companies. Two Japanese companies, PT Shibaura Shearing Indonesia and PT Katsushiro Indonesia are two largest importers of HRP of the type measuring 20 mm and higher in thickness.  In terms of volume, the two companies imported a total of around 17,000 tons HRP in   2009, with a total value of around US$ 22.3 million or almost 60% of total value of imports of 20 mm HRP.

PT Shibaura Shearing Indonesia, the largest importer is a Japanese joint venture involved in steel plate processing including plate cutting, shearing, bending, welding and fabricating. Located in MM2100 industrial town Cikarang, Bekasi, the company provides its services to heavy equipment/yellow good industry including, steel fabricating companies, machinery fabricating/component industry, automotive component industry, shipbuilding and repairing and others.  Being a Japanese company, their main customers also consists of Japanese related manufacturers/ fabricators including PT Hitachi Indonesia, PT Hitachi Construction and Machinery, PT Saka Indonesia and PT Hanken Indonesia.   PT Shibaura Shearing Indonesia also gets the supply of HRP, particularly from Japanese steel companies including Hanwa Co, Sumitomo Corporations, Marubeni Corp, and Metal One Corp. 

PT Katsushiro Indonesia is also a Japanese investment company involved in producing heavy equipment and industrial machinery components and parts.  Its major customers are heavy equipment industries such as PT Daya Kobelco, PT Komatsu, PT Caterpillar and PT United Tractors, PT Natra Raya and steel fabricating company including PT Sanggar Sarana Baja

PT. Katsushiro Indonesia is a joint venture company established in, 1995 with a capital of US $ 7,400,000. The plant is located in Kawasan Industri Cikarang, Jababeka g, Bekasi, West Java, occupying 41.899 m2. The company's products include steel plate for heavy equipment components, civil works, industrial generals, manufacturing and machineries, automotive, agricultural equipment and also the customized components according to customer order and demands. Up to now, annual production capacity of PT. Katsushiro Indonesia has reached 60,000 tons per year material consumption. The company gets the supply of HRP from imports particularly from Metal One Corp, Nippon Steel Trading of Japan and Shanghai Platec Trading of China.

Besides serving local companies, Katsushiro has also exported their products to several countries in Asia, Europe and America.  Their export customers include, Thai Kobelco, Furukawa, and Maruma etc. 

PT Siemens Indonesia which is involved in manufacturing MV and HV Power transmission and distribution system is also quite a big importer of HRP. This company is the producer of switchgear and other electrical equipment with its factory (fabrication) located in North Jakarta. HRPs used by this company are imported mainly imported from Germany particularly from RTR Handelsgesserschaft, Ancofer Stahlhandel GMBH, Universal Eisen, Salzgitter Stahlhandel GMBH, and Salzgitter Mannesmann.GMBH.

PT Korindo Heavy Industry, a Korean joint venture company is also one of notable importer of HRP.  Started operation in 2006, This Company is involved in large truck / trailer assembling, steel fabricating steel structures and also wind towers.  The company is presently the only wind tower manufacturer in Indonesia with export as their target market. The company exported wind towers to USA, India and Mexico.  The supply of HRP is mostly from Baosteel Singapore Pte Ltd.

PT Saipem Indonesia is a foreign investment company involved in steel fabricating and steel structures particularly serving oil and gas in industry.  The company's plant sites are located in Batam and Tanjung Karimun, Riau. This company imports HRP from Singapore (Regency Steel Asia and Edgen Murrai Pte.Ltd.)...


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