Trade activities remain weak despite new spike in surplus

Indonesia’s trade surplus hit the highest level in over a year in September due to a “temporary” spike in iron, steel and tin exports. However, overall exports and imports remain in the red amid weak global trade.

At US$1.1 billion, the trade surplus for September reached a 13-month high backed by a 94 percent month-on-month surge in iron and steel exports and a 68 percent increase in tin shipments overseas, according to data from the Central Statistics Agency (BPS) released Monday.

“This is due to our surging exports for iron and steel to Australia and Thailand. The increase is very big — we hope they also expand to other markets to sustain this,” said BPS deputy head of distribution and statistics Sasmito Hadi Wibowo.

However, iron and steel businesspeople expressed concerns that the bright sales were only temporary.

Krakatau Steel corporate secretary Iip Arief Budiman acknowledged improved shipments of hot rolled plate — raw materials for construction, roads and household equipment — to Australia but the neighbor may ban cheaper iron and steel products from Indonesia in the future, pending approval from the World Trade Organization (WTO).

As for Thailand, the surge in September shipments was a special case because major steel producer BlueScope Thailand undertook a one-month production overhaul, forcing it to import some products.

“Krakatau Posco [subsidiary of Krakatau Steel] and BlueScope Indonesia are exporting galvanized steel [for roof structures] to Thailand while the local producer there is doing an overhaul,” Iip explained.

Nevertheless, Krakatau Steel is continuing efforts to improve its current exports to Australia and Malaysia and Krakatau Posco plans to diversify export destinations to India, Middle East and Europe.

Despite the record-high trade surplus in September, the value of exports and imports still declined along with the lackluster global economic growth and slow recovery of commodity prices.

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Overall exports in September stood at $12.51 billion, down 0.59 percent year-on-year (yoy), while exports for the January to September period totaled $104.36 billion, a 9.41 percent decrease.

Imports were also weak, with the September value reaching $11.3 billion, down 2.26 percent yoy, while total imports for the first nine months of the year were at $94.66 billion, a 6.09 percent drop.

New BPS head Suhariyanto brushed off concerns about the decline in trade activity, saying it was still at a healthy level and was better than world averages.

“Our declining trade pattern is not at a concerning level because the decrease is slight. We just hope that for the remaining three months, exports will start going up,” he said, expecting the government to realize its plan to diversify export products and markets to jack up growth.

President Joko “Jokowi” Widodo has dared exporters to penetrate non-traditional markets like Africa, Central and South Asia, Central and East Europe and South America as well as improve product quality, design, packaging and promotion.

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The strategy is aimed at avoiding an export value decrease from the $150.2 billion achieved last year.

However, Bank Central Asia (BCA) chief economist David Sumual estimated that this year’s exports would only reach a maximum of $140 billion.

“With only three months left and our exports around $11 billion to $12 billion per month, I think it’s difficult to maintain last year’s figure,” he said.

CIMB Niaga chief economist Adrian Panggabean shared a similar view, saying exports were unlikely to reach the 2015 level due to weak global demand resulting in a lower trade volume, especially for commodity trade. “The lower imports of raw materials also indicate a weak manufacturing sector and weak economy in general,” he added.
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