European Company Entry into Indonesia’s Steel Industry

by | Dec 18, 2020 | Market Research | 0 comments

Steel has a vital role in almost every industrial sector in Indonesia. Commonly nicknamed as the Mother of Industry, the finished goods of iron and steel are widely used as raw materials for construction, automotive, fleet, electronics, machinery, oil and gas, telecommunication and even food and beverage cans. Due to its extensive use, steel contributes significantly to the nation’s economy.

(Source: steelclub)

The demand for steel in Indonesia has been continuously growing. The consumption of steel reached 15,9 million tons in 2019 (Indonesia Iron and Steel Association, 2020). The market will grow even more due to the government’s extensive effort in developing the country’s infrastructure. However, the local industry is currently only utilizing 50% of its capacity, partly because local companies can not keep up with the competition from imported products in terms of price and quality (Cabinet Secretariat of the Republic of Indonesia, 2020).

An Outlook

A two-case scenario after the COVID-19 Pandemic

Indonesian Ministry of Public Works and Housing (PUPR) has established the 2020–2024 infrastructure development program to improve the nation’s connectivity. The program includes: toll-roads (2,724 km), new roads (3,224 km), bridges (38,726 m) and flyovers (31,053 m). Also, there will be many construction projects of dams, irrigation flows, flats and houses, airports, ports, industrial estates, power plants and many other infrastructure facilities.

With the increasing demand for steel, the Indonesian government aims to improve the domestic production of steel and hope for investment in the industry. It is expected that Indonesia would increase the production capacity to 17 million tons by 2024 and to 25 million tons in 2035.

However, the current pandemic situation has put many business activities on hold, including Indonesia’s infrastructure development that has directly affected the iron and steel industry. Despite the positive overall outlook for steel demand in Indonesia, the current uncertainties lead to a two-case scenario, according to the Indonesian Iron and Steel Industry Association (Steel Orbit, 2020).

The worst-case scenario is that steel consumption may fall slightly to 15,9 million mt in 2021. But if we are to remain positive, the consumption is expected to increase and reach 17 million mt in 2021, from 15,9 million mt in 2019.

Enter the Market

How BRIGHT Indonesia assisted a Spain-based company to Indonesia

As the biggest market in Southeast Asia, Indonesia attracts many overseas companies to expand their business to the country. Moreover, the growing demand for steel over the years has caught steel manufacturers’ attention. The dependency on imported raw materials and the lack of local products’ utilization interest many foreign companies, including Spanish Steel Trading Company.

Headquartered in the middle of the Basque industrial network, the company is a distributor and trader of chemical polymer, as well as supplier of catalyst and equipment. It owns and operates subsidiary companies in Iran, Turkey, China, Egypt, Malaysia and India.

As a company that is dedicated to partnering with manufacturers throughout the product life cycle, they serve many different sectors and supply specialized polymers for technological packaging, building and construction, automotive, and other applications.

In 2018, the Spanish Steel Trading Company saw Indonesia as a promising market and planned to enter the steel industry. However, they faced several obstacles. First of all, searching for the right distributor in Indonesia is hard. It was hard to find the right contact person, and often, they don’t respond even more with the communication barriers. Also, Indonesia’s bureaucratic hurdles are complex. Many registrations and administration red tape must be conducted before they can distribute their products in Indonesia. The process is challenging and requires some amount of time.

BRIGHT Indonesia helped assist the company in searching for the right distributors. We communicated with local distributors, performing initial research, and due diligence, then we set up a meeting between the Spanish Steel Trading company and the potential Indonesian Partner.

The objective of the project is to support Spanish Steel Trading Company in their international business development strategy regarding the product market in Indonesia by searching for a suitable partner within the market either it’s a Distributor, Agents, Suppliers, or Joint Venture Partners. BI relies on our wide networks of contacts along with the research development of Indonesian contact list.

To comply with the objective, we proposed to develop a database containing key strategic information about the companies in the relevant market segments for the company. The database has been developed following some stages to cover a long list of companies with basic information and also a shortlist of companies with detailed information that are keen to meet with the Spanish Steel Trading Company.

The next step is the meeting agenda arrangement since the business meeting is the perfect environment for exchanging ideas and experiences for Spanish Steel Trading Company and local partners in Indonesia to know more about each party and business opportunities that can be explored together. BI set the agenda for the meeting with several companies including Indonesia’s largest steel company PT Krakatau Steel.

Easily Enter Indonesia Steel Industry with BRIGHT Indonesia

Work with BRIGHT Indonesia can make the company satisfied. Since BRIGHT Indonesia will assist provided on the ground, which includes virtual assistant during the mission, logistic arrangement, and communication of every detail, it can make the Spanish Steel Trading Company focus on the development of partnership cooperation without thinking further about the hassle during their business trip.

BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, and  Business Registration and Establishment services that can help you in expanding and developing your business, register and establish your products and company, as well as obtain the work and stay permit in Indonesia ((expatriates utilization plan (RPTKA), expatriates utilization permit (IMTA), limited stay permit (KITAS) easier. 

BRIGHT Indonesia always strives to give excellent services designed only to fulfill your company’s needs. Also, BRIGHT Indonesia has a great understanding of the EU-Indonesia relations. Besides being a  professional, BRIGHT Indonesia is a delightful company and never lets you down. For more information, email to info@brightindonesia.net. 

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