Although the automotive industry is dominated by affiliated Japanese companies, China is the top country of origin of forged steel imports in Indonesia. The total imported volume of forged steel contributed to more than 95% of the total market size. The automotive sector is the largest forged steel consumer in Indonesia.
The fact that China has the largest forged steel supplier in Indonesia, where the automotive industry is the largest consumer, and Japanese OEM vehicles have a solid domination in this sector, shows that there is a window of opportunity for non-Japanese forged steel suppliers to enter the Indonesian market. Among businesses presupposition is that the Japanese business network is really strong and they prefer to build partnerships with Japanese companies rather than ones from other countries.
On the other hand, Japan has the largest market share in import value, which shows that the average price of forged steel from China is lower than Japan. This indicates that in the forged steel business, price is a more contributing factor for the purchasing decision than business network.
Forged steel is a semi-finished material that can be used in various industries to manufacture a highly strong and durable product. For example, in the automotive industry, forged steel is used to manufacture a crankshaft, an engine component that’s designed to last (not designed to be replaced during the car’s lifetime). Several other industries or sectors that use forged steel are molding machine manufacturing, construction, heavy equipment, ship manufacturing, and the defense industry.
Indonesia has steel-producing facilities, but the local capacity of qualified forged steel is dreadfully limited to enable supporting the need for such highly qualified semi-finished material for its industrial consumers.
Furthermore, the other top countries that supply forged steel to Indonesia—besides Japan and China—are Taiwan, South Korea, and Sweden. Sweden is the only non-Asia country in the top 5 country origin list, while all other non-Asia countries, such as Germany, Brazil, and Austria, combined only contribute to a tiny share of the market, with less than 1% in both volume and value.
The largest crankshaft forged steel importer in Indonesia is automotive component manufacturers, both in volume and value. Other automotive component manufacturers are seen to be the major importers. These major importers are joint venture companies between local and foreign companies, mostly from Japan.
It is reasonable that Japanese companies have made some investment in forged steel processing facility business for the automotive industry in Indonesia, as over 90% of the locally manufactured vehicles are Japanese OEMs, either four-wheelers, two-wheelers, or commercial vehicles. For instance, PT Metalart Astra is one of the forged steel processing facilities in Indonesia, manufacturing automotive components made from forged steel material. The company is a member of Astra Group, which owns some major Japanese automotive brands in Indonesia, such as Toyota, Daihatsu, Isuzu, and Honda (motorbikes only).
While there are several forged steel processing facilities in Indonesia, there are only a few companies that are capable of manufacturing forged steel of such high-quality semi-finished products. One of the companies is PT Jatim Taman Steel, a member of the Mitsubishi Steel Group. The company manufactures forged steel for both the domestic and export markets.
Read Also: Why the Metals Industry Tops Indonesia’s FDI Sectors
It is understandable that the population of forged steel manufacturers in Indonesia is small because the forged steel manufacturing business requires a huge amount of investment to establish, a huge amount of energy to operate, and the operation permit is considered difficult to obtain, remembering that this industry is producing a high level of pollution. Therefore, a forged steel production facility typically has a high capacity to achieve the necessary economies of scale. As a result, the production rate is designed to meet the needs of regional countries as well.
Aviv is a Manager at Central Insight. He has worked on various projects as a college student in different industries, both in Indonesia and Germany, from aerospace and electric & power to heavy machinery. In his professional career, he has been exposed to several projects in various sectors, including finance, innovation ecosystems, clients’ internal assessments, cold chain logistics, automotive, construction, F&B, chemicals, healthcare, agriculture, e-commerce and digital business, entertainment, energy, and waste management, to mention a few. He has experience in leading project execution, from managing the work with the team, gathering information and data, conducting fieldwork, to communicating with clients. Aviv holds two Bachelor’s degrees: an Indonesian degree from Swiss German University and an international degree from South Westphalia University of Applied Sciences.
Aviv is a Manager at Central Insight. He has worked on various projects as a college student in different industries, both in Indonesia and Germany, from aerospace and electric & power to heavy machinery. In his professional career, he has been exposed to several projects in various sectors, including finance, innovation ecosystems, clients’ internal assessments, cold chain logistics, automotive, construction, F&B, chemicals, healthcare, agriculture, e-commerce and digital business, entertainment, energy, and waste management, to mention a few. He has experience in leading project execution, from managing the work with the team, gathering information and data, conducting fieldwork, to communicating with clients. Aviv holds two Bachelor’s degrees: an Indonesian degree from Swiss German University and an international degree from South Westphalia University of Applied Sciences.
