Executive Summary

Key insights and market outlook

Indonesia's steel industry is projected to remain under significant pressure in 2026 due to continued dominance of cheap imports, with imports expected to account for 55% of national demand ¹

³. Domestic consumption remains weak, particularly in the construction sector, while low-priced imports, mainly from China, continue to suppress local manufacturers' capacity utilization to around 50% ¹.

Full Analysis

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Deep Dive Analysis

Indonesia's Steel Industry Faces Continued Challenges in 2026

Persistent Import Pressure

Indonesia's steel industry is expected to remain under significant pressure in 2026 as cheap imports continue to dominate the market ¹

³. The Indonesian Iron and Steel Industry Association (IISIA) projects that imports will account for 55% of national steel demand ¹, maintaining their strong market presence. This high import penetration is suppressing domestic manufacturers' capacity utilization, which is expected to remain at around 50% ¹.

Weak Domestic Consumption

The weak domestic consumption environment, particularly in the construction sector, is compounding the challenges faced by local steel manufacturers ¹

³. According to Harry Warganegara, Executive Director of IISIA, "Domestic consumption has not fully recovered, the construction sector remains weak, while import pressure stays high" ³. This combination of factors is creating a challenging operating environment for Indonesian steel producers.

Impact on Local Manufacturers

The dominance of low-priced imports, primarily from China, is having a significant impact on local manufacturers. The pressure from these imports is not only affecting capacity utilization but also potentially impacting profit margins and production output ³

. Unless addressed through strong and consistent policy measures, this situation may lead to stagnation or even decline in domestic production capacity.

Bauxite Industry Context

The bauxite industry, a key raw material supplier for the aluminum sector, is also undergoing significant changes following Indonesia's export ban on bauxite ore since 2023 ²

. The industry's performance is now closely tied to the development of downstream processing facilities, particularly smelters that can process bauxite into alumina and subsequently into aluminum ². According to the Indonesian Bauxite Association (ABI), a single bauxite smelter can absorb 1 million tons of bauxite ore, producing 400-500 thousand tons of alumina ².

References