CONTRIBUTION OF CONSTRUCTION INDUSTRY TO INDONESIAN STEEL INDUSTRY

Transcription

1 CONTRIBUTION OF CONSTRUCTION INDUSTRY TO INDONESIAN STEEL INDUSTRY Basso D. Makahanap Standardization & Certification Committee THE INDONESIAN IRON & STEEL INDUSTRY ASSOCIATION Manila, 27 November 2017

2 Introduction The main customer of Indonesian steel product is construction Industry. Construction sector is one of Indonesian GDP big five driver. The biggest driver of Indonesian construction sector currently are infrastructure development projects, housing, high rise building for the offices, hotels etc. either conducted by the government or private sector. To build all of those infrastructure, housing, high rise building etc. steel is needed, the result is demand of steel will be rise up follow the infrastructure, housing, high rise building development trend. Most of the steel specification required for the infrastructure purpose, housing and high rise building can be produced in Indonesia.

3 Indonesian Steel Market Segmentation Transportation, Oil & Gas, 7% 8% Machinery 4% Others, 3% Construction, 78% Indonesian steel market is dominated by construction industry. The construction sector recently grow up significantly due to infrastructure government s development program and demand for the offices, hotels and housing sector. This phenomena is in line with increasing of Indonesia s population and its gross domestic product It is can be said that the construction sector is key driver of Indonesian steel industry. Figure 1

4 Contribution of Construction Sector To Indonesia s Economy Contribution Margin to GDP 2015 (%) Figure 2 The construction industry influences most, if not all, of any nation's economic sectors. It builds and provides infrastructure for other economic sectors, such as agriculture, tourism, manufacturing, trade and others. The importance of the construction industry to the economy can be measured by its contribution to the Gross Domestic Product (GDP), in the year 2015 construction sector is the second largest contributor Indonesia s Gross GDP Construction can be an important generator of jobs since the number of people employed in the construction industry can be high due to its relatively labour intensive Contribution of construction sector to Indonesia s Gross Domestic Product (GDP) increase significantly. Its contribution to Indonesia s GDP in 2006 is about 7.5%, in 2015 increased to 14.6%.

5 Indonesia s construction industry output grow up yearly and will continue to grow, driven by investment in infrastructure, energy and residential projects, as shown in Figure 3 that shows historical and predicted construction output up to The construction industry s output grew by 6.2% in 2016 in real terms, following an average annual growth of 6.6% during the preceding four years. Over the past five years, growth has been supported by favorable demographics, and public and private sector investment in infrastructure and residential construction projects, leading to an increase in demand for the construction industry. The development of transport infrastructure and the construction of affordable housing units will be the key growth drivers for construction industry and steel industry. Figure 4

6 Government s Program For People Housing Indonesian population increased yearly, current population of Indonesia is about 260 million. As a result, the housing requirement also increased yearly. In order to fulfill the housing requirement, government increase the state housing budget significantly. The housing requirement is also fulfilled by the private sector Population (Mio) Ministry of Public Works and Public Housing Budget (IDR Trillion) Correlation between Indonesia s population and state housing budget Figure 5

7 Influence of Urbanization to Steel Industry Cumulative High Rise Building Built < Figure 6 Indonesia s urban population is increasing significantly, according to World bank, urbanization figure in Indonesia is very high, about 4.1%. This urbanization figure boost the demand for for housing, office space, shopping space, hotels and health facility like hospitals as urbanization proceeds. The response of those demands is expressed by among others, increase of high rise building (>200 m height) number, the number is increase significantly every year. Increase of high rise building in terms of height and numbers will boost up the construction industry, it means increase the requirement of steel in terms of quantity and quality. The higher the building the stronger and tougher steel is required. High rise building is building with >200 m height

8 High Rise Building Location Up To 2016 High Rise Building Location Up To 2016 Surabaya, 4 Bandung, 1 In Indonesia case, the high rise building mostly built in Jakarta and its surrounding areas as shown in Figure 5. Jakarta is the highest population city in Indonesia, need a lot of space for housings, offices, health and other social facilities. Figure 7 Jakarta And Surrounding Areas, 53 High urbanization will boost the population density, it is means will boost the housings, transportation, social, health and business facilities. In the urban area, the space is limited so the high population density need more taller buildings to accommodate those requirement. The high rise building will be distributed to another cities in the future due distribution of the wealth. It means that a lot of steel in terms of quantity and quality will be needed. It is can be said that urbanization, construction and steel intensity go hand in hand, means that the urbanization has a significant influence to the steel industry.

9 Government Infrastructure Budget Govt. Infrastructure Budget (IDR Trillion) % of GDP Improving infrastructure is a priority of the government program since it is critical for the country s economic development, Poor of country s infrastructure means higher logistic cost and reduce the country competitiveness. The government program to improve the infrastructure quality is focused more on the expansion of the country rail, harbors, roads, airports and other core infrastructure facilities. In order to realize those infrastructure development programs, the government increase the state budget as shown in Figure Figure 8 Correlation between Apparent Steel Consumption, Govenrment Budget For Infrastructure and Contribution of Construction Industry to GDB There is a correlation between apparent steel consumption, government infrastructure budget and contribution of construction sector to GDP as shown in Figure 7. It is shown that the apparent steel consumption was increased if the government budget for the infrastructure program increased and the result was the contribution of construction sector to GDP was increased too App Steel Cons. (ton x 100,000) 5 0 All of the infrastructure projects need steel for their construction. It is clearly that the infrastructure programs will be a key driver for construction sector at the end will be the key driver for Indonesia s steel industry. Govt. Infrastructure Budget (Trillion IDR) % of GDB Figure 9

10 The correlation between steel consumption and the GDP/capita is shown in Figure 8. Indonesian position is in Stage 1. The steel consumption is driven largely by high levels of government investment that boost construction and infrastructure demand. Indonesia still need a lot of steel to fulfill the infrastructure and other facilities caused by high urbanization figure. Figure 10

11 Stone Sand Etc Raw Materials Additives Energy Etc Lime Stone Energy Etc. Oil Refinery By Product Natural Asphalt Indonesian Construction Input And Output Process Input Construction Material Steel Cement Asphalt Transportation Labor Construction Industry Figure 3 Infrastructure High Rise Building for housings, hotels offices etc. Transportation Output Better Human And Material Moving Services Industry Sector As shown in this Input and Output Process scheme, construction industry drive several economy sector, both in Input and Output sectors. The driver of Indonesia s construction industry now is the sectors in the output side due to aggressive government infrastructure development and high demand for housing, offices, hotels and other business and social facilities. If the GDP grow up, construction industry will grow up too, input and output industries will be automatically grow up.

12 Indonesia s Future Construction Steel Quality Demand The building height is higher and higher, means that the steel quality required is higher and higher too. Stronger, more tough and higher earth quake resistance steel will be needed. Wisma BNI 46 The highest building in Indonesia up to Construction finished on meter height, 50 floors Cemindo Tower, Jakarta The highest building in Indonesia up to Construction finished on meter height, 63 floors Figure 11 The Signature Tower, Jakarta Will be the highest building in Indonesia on meter height, 111 floors

13 Indonesia s Infrastructure Target Up To 2019 Roads Roads, 2650 Km Toll Roads, 1000 Km Road Maintenance, 4670 Km Ports Sea Ports, 24 Ferry Ports, 60 Locations Airports Commercial Airports, 15 Airports Development For Cargo, 6 location Railways Total Track Length, 3258 Km Intercity Railway Track, 2159 Km City Railway Track, 1000 Km Power & Irrigation Dams, 40 Hydroelectric Power Stations, 33 Oil Refineries, 2 Electricity Generations, MW Industrial Facilities Industrial Parks, 15 Figure 12 Source : ITE Build & Interiors, Indonesia s Construction Industry : Building the Archipelago

14 Indonesia s Steel Supply Demand 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Capacity x 1000 Iron Making Steel Making Rolling Figure 13 No Product Capacity Million ton/year Flat Products 1 Reinforcing bar Medium/Large Section 2 H Beam Equal angle 4 U Channel 5 Wide Flange 6 I Beam Flat Products 7 Hot Rolled Coil/Plate Galvanized sheet Welded Pipe There is unbalance between iron making, steel making and rolling mill, the capacity of the up stream is smaller compare to the middle and down stream. Indonesia still need a certain more capacity especially for iron and steel making. From quality point of view, most of the steel quality for construction application can be produced locally.

15 Conclusion Indonesia s development in infrastructure is growing up. Housings, business and social facilities requirement in Indonesia will increase in line with the increasing of population and their prosperity. Increasing of urbanization figure, push the high rise building development due to land limitation. This condition will push the steel demand in quantity and quality point of view. Infrastructure development, increasing of housing requirement either in country side or urban areas are the driver of construction sector. As the construction industry grow up steel demand in quantity and quality point of view will automatically grow up. It is clearly that construction industry in Indonesia is the key driver of Indonesia s steel industry.

16 TERIMA KASIH

17 References 1. Adrian Panggabean, Eonomic Outlook : Indonesia in 2017, PT Bank CIMB Niaga Tbk, 10 Nopember 2016; 2. Badan Pusat Statistik, Konstruksi Dalam Angka 2016, Desember BMI Research, Industry Trend Analysis Strong Outlook for Indonesia s Building Sector, May 2017; 4. Budiwibowo, Agung and Trigunarsyah et.al, Competitiveness of the Indonesian construction industry Journal of Construction in Developing Countries, Vol.14 No1, pp , QUT Digital Repository: 5. Construction intelligence center, Construction growth in Indonesia to remain high over the next five years, July 3 rd 2017; Daewoo Securities Indonesia, Overweight (Initiate) Initiation report, December 20, 2016; 8. Direktorat Jenderal Anggaran Kementerian Keuangan 2015, Peranan APBN Dalam Mengatasi backlog Perumahan Bagi Masyarakat Berpenghasilan Rendah (MBR) ; 9. Kompas.com - 11/02/2017, 16:30 WIB Anggaran untuk Perumahan Rakyat pada 2017 Capai Rp 17,3 Triliun 10. INDUSTRY TODAY, Construction Industry in Indonesia Growing 8% to 9% of CAGR-Forecast to 2021, Published Mon, Aug 8 th ITE Build & Interiors, Indonesia s Construction Industry : Building the Archipelago ; 12. media.iyaa.com, Editor Risnawati Avin, 10 Gedung Tertinggi di Indonesia, Salah Satunya Akan Kalahkan Shanghai Tower di Cina, 06 Februari OECD Development Center, Economic Outlook for Southeast Asia, China and India 2017, Adddrssing Energy Challenges; 14. Perumnas.co.id 15. SEAISI, 2016 Steel Statistical Yearbook ; 16. Steven R. Tabor, Constraint to Indonesia s Economic Growth, Asian Development Bank Papers On Indonesia, No 10, December 2015; Building Indonesia s future unblocking the pipeline of infrastructure projects 18.