Infrastructure consumption is expected to be sharply reduced, putting pressure on demand in the steel industry

Indonesia's steel industry is facing significant demand slowdown pressure due to substantial government cuts to infrastructure budgets.

In February, Indonesian President Prabowo Subianto announced a reduction of 306.7 trillion rupiah (approximately US$18.7 billion) from the 2025 national budget to prioritize livelihood projects such as the free school meal program and universal health screenings. A25P steel The free meal program alone is expected to see expenditures exceeding 171 trillion rupiah this year.

This adjustment resulted in a 73.3% year-on-year reduction in the budget of Indonesia's Ministry of Public Works, from 110.95 trillion Indonesian Rupiah in 2024 to 29.57 trillion Indonesian Rupiah, leading to a sharp contraction in the scale of new public building and infrastructure projects.

According to a local rerolling mill, severe funding shortages for construction projects have led to a significant decline in steel demand, resulting in a continued slump in the steel market. A25P steel The mill stated that it has reduced its purchases of semi-finished steel products, expecting a 20%–30% decrease compared to last year.

A trader in Jakarta reported that "there is almost no actual demand in the market," and also pointed out that the exchange rate outlook is not optimistic. A steel mill manager stated that due to cuts in infrastructure spending, the mill's rebar sales have decreased by about 20% year-on-year, emphasizing that "the government should take the lead in investment to encourage private projects to follow suit."

Another trader frankly admitted that the steel industry is facing severe operating conditions due to weak end-user demand, A25P steel, noting that government infrastructure projects previously accounted for 60%-70% of Indonesia's total steel consumption.

The Indonesian Steel Association pointed out that the infrastructure budget's share of the national budget has dropped sharply from 17% last year to the current 3%, a change that has a "significant" impact on the industry.

Data shows that Indonesia's apparent steel consumption last year was 18.6 million tons, of which domestic production was 15.8 million tons, imports were 8.7 million tons, and exports were 5.9 million tons.