SINGAPORE Few Indonesian ferrous scrap consumers are willing to take the risk of buying overseas material again more than six months after a contamination scandal halted imports.
The local steel industry has been facing a scrap shortage in recent months after customs authorities began seizing thousands of containers carrying scrap metals for alleged contamination by hazardous and toxic wastes.
The lengthy detainment of scrap shipments at several Indonesian ports has reduced production rates at many mini-mills in the country by as much as 50 percent.
"The detainments happened in February, March, April and possibly May. Then, basically all HMS (heavy melting steel) scrap couldnt be imported, so (the melt shops) tried to get only shredded material, but the supply is limited. Its not 100-percent safe, too," a source at a melt shop in Gresik, East Java, told AMM sister publication Steel First. "Some companies also cant get a renewal licence for importing scrap. With all the uncertainties, we have to depend on the local supply that for sure is not enough. Since its too risky to import scrap, some of us chose to import billet instead."
Indonesias Environment Ministry is reluctant to allow scrap containers into the country because they are thought to be heavily contaminated with liquid and mixed waste.
Some containers have already been returned to their country of origin, including some 90 containers apparently sent back to Britain in May.
"Most of the scrap importers have some containers that have been sitting in port since last February or March. The total number of containers detained all over Indonesia was around 10,000, but (they have been) slowly released until there are only a couple of thousand now. Some of them have already been re-exported. The rest of them will be sitting there for an indefinite period of time," said the melt shop source, whose operations are among those affected by the scrap shortfall.
"Basically, some of the melt shops are running at half their capacity, while others are using sponge iron to maintain normal operations," he added.
The Indonesian Iron and Steel Industry Association (IISIA) has been working with different government agencies to try to speed up the release of the remaining containers. "IISIA is doing everything it can to talk to the government, but so far there have been no positive results," the source said.
The IISIA could not be reached for comment.
A version of this article was first published by AMM sister publication Steel First.