Raw Steel Material Price Up 26% in Second Semester

Prices of raw steel materials in the second semester of 2011 is projected to increase by 20-26 percent as world oil prices fluctuate. (BLOOMBERG/RICH PRESS)

JAKARTA (IFT) - Prices of raw steel materials in the second semester of 2011 is projected to increase by 20-26 percent as world oil prices fluctuate. Irvan Kamal Hakim, Marketing Director of PT Krakatau Steel Tbk (KRAS), said that the raw material prices will be higher in 2011 than in 2010, due to the higher production cost of components .

"The year-on-year increase from the first semester of 2010 to the same period this year was about 20-21 percent. We expect the price increase of raw materials to continue until the end of the year," he said.

The increase in raw iron ore material prices in the second semester 2011 is projected to reach 20 percent to US$ 184 per ton. In the second semester of 2010, the price was US$ 153 per ton. Scrap prices is also estimated to rise 21 percent to US$ 493 per ton and the semi-finished slab by 26 percent to US$ 715 per ton.

According to Irvan, the increase in raw material prices will affect the selling price. In the market, the selling price of steel has been increasing since the first quarter of 2011 and peaked in March 2011. It fell and reached its lowest level in July 2011, and is expected to increase again in the second semester.

According to Irvan, the hike of selling prices in the second semester will also be influenced by the growing consumption level after the Idul Fitri.

Domestic steel prices, such as the selling price of the black plate, will rise 8.2 percent by December 2011 to Rp 9.200 per kilogram. In June 2011, the price was Rp 8.500 per kilogram. The selling price of the white plate is also expected to rise 5.8 percent to Rp 10,800 per kilogram by December 2011, compared to June 2011’s price of Rp 10,200 per kilogram. The wire rod’s price will go up 5.2 percent to Rp 8,000 per kilogram by December 2011, compared to June 2011’s price of Rp 7.600 per kilogram.

I Gusti Putu Suryawirawan, Director of Metal-Based Material Industry at the Ministry of Industry, said the world raw steel materials price increase can still rise as the global economy improves. According to Putu, this increase can also be caused by speculators and traders. Raw steel materials prices should follow also the increase in the international oil prices.

Increased Consumption

Irvan said that the national steel consumption is projected to rise five percent in the second semester of 2011, compared to the first semester’s 3.58 million tons. The increase comes primarily from the government’s infrastructure projects.

"The absorption of the first semester of 2011’s budget is still small, we expect 65 percent of budget absorption will occur in the second semester," he said.

According to Irfan, Indonesia's per capita steel consumption is only 30 kilograms per year, far below Malaysia’s consumption of more than 200 kilograms per year. This condition indicates that the steel consumption has the potential to grow.

Fazwar Budjang, President Director of PT Krakatau Steel, said that in the first semester, a number of government projects are expected to cease and will resume in the second semester.