PT Krakatau Steel Tbk (IDX: KRAS), plans to increase capital through a rights issue mechanism in this fourth quarter (4Q) of 2019. - Photo by the Company

JAKARTA (TheInsiderStories) – Indonesia domestic steel producers and industry players are calling on the government to monitor closely the steel trade as they are concerned that the U.S President Donald Trump’s decision to impose steep tariff on Chinese steel and aluminum could trigger a spike of Chinese steel imports to the ASEAN region, including Indonesia.

Indonesia and other ASEAN countries have become major export markets for Chinese steel. China, the world’s largest steel producer, is plagued by a major steel oversupply and therefore is in a position to – competitively – export steel to ASEAN nations.

Hidayat Triseputro, Executive Director of the Indonesian Iron and Steel Industry Association said the White House regulation is a positive message on the effort to control Chinese massive imported steels globally.

“It’s not only U.S who feel overwhelmed with Chinese imported products, we may say all the world is feeling the same thing. Chinese steels and aluminum products are flooding global market,” he told TheInsiderStories.

He said domestic steel production capacity is indeed not enough to meet domestic steel demand. However, importers are currently taking advantage of the import policies, and this comes at the expense of expansion of the domestic steel industry.

Based on data from Indonesia Statistics, Indonesia imported 1.03 million tons of iron and steel in December 2017, rise 9.7 per cent from 0.93 million tons in the previous month.

Trump is to impose steep tariffs on steel and aluminum imports next week, hitting producers like Canada and China. He said steel products face a 25 per cent tariff, with 10 per cent on aluminum goods.

The value of shares in American steel manufacturers jumped significantly after the announcement.

This decision will likely hit China and Canada as the main suppliers of the products. China isn’t the only country to export the material to the US – 110 countries and territories do so.

China is only the 11th biggest exporter to the U.S – some U.S allies, including Canada, Japan and South Korea are among the 10 biggest sources of steel for the US, and they all face a big bump in costs.

The recommendation to impose tariffs was made in a report by Secretary of Commerce Wilbur Ross. Trump had asked him to investigate “whether steel imports threaten to impair the national security”.

The recommendations are intended to increase US aluminum and steel production by up to 80 per cent of industrial capacity.

Currently, U.S steel mills operate only with the capacity of 73 per cent, while aluminum plants operate with 48 per cent capacity.

The regulation is reflecting Trump’s initiation when he visited China last year. He is committed to narrow China’s trade surplus with the United States, which stood at $347 billion in 2016.

The U.S government has raised duties on selected Chinese goods, including stainless steel and plywood, to offset what it says are improper subsidies, and is investigating whether Beijing strong-arms foreign companies to hand over proprietary technology.

Some American companies are concerned that Trump’s narrow focus on trade in goods might signify that he pays too little attention to other issues, such as Chinese rules that limit their presence in finance, health care, and other service industries.