The role of iron and nickel smelters for the Indonesian steel industries

Abstract

The iron and steel industries play a crucial role in supporting national development. The high dependence on imported raw materials causes Indonesia to suffer US $ 2.11 billion steel trade deficit per year. This study identifies the role of iron and nickel smelters in supporting the development of steel industries. The methodology used is descriptive statistics and regression models. Ferronickel and nickel pig iron as the primary raw materials for stainless steel have been produced in Indonesia, but only 23.05% and 47.77% are sold domestically. According to the linear regression models, it is expected that steel production and consumption will grow. Indonesia will become an independent steel producer and even export it by 2050. However, the supply chain is weak and poorly integrated as the local raw materials do not meet the domestic steel industry’s specifications. By 2050, 44 million tonnes of scrap, 19 million tonnes of sponge iron, 16 million tonnes of nickel, and 10 million tonnes of other raw materials will be needed annually. Hence, to reduce the national steel trade deficit, Indonesia must increase the smelters capacity and optimize local iron resources by increasing Fe content to meet the specifications of the national steel industry.