The slow collapse of Indonesia’s steel industry

Indonesia’s steel industry is facing a deepening crisis as major producers buckle under a wave of cheap imports, particularly from China, amid oversupply and weakening domestic demand. The collapse of Metal Steel Group in 2025 and the planned closure of PT Krakatau Osaka Steel in 2026 have sharpened concerns over the sector’s survival, prompting the government to mandate the Indonesian National Standard (SNI) for steel products starting May 20, 2026.

While producers see the move as a long-awaited lifeline, importers warn it could disrupt supply chains and add fresh uncertainty to the market. Industry players have also warned that the new regulation risks triggering production stoppages, layoffs and opportunities for corruption.

The regulation came in the form of Industry Ministerial Regulations Nos. 23/ and 24/2026, which mandate that all steel products, both domestically produced and imported, comply with SNI standards for zinc-coated steel sheet (Bj LS) and aluminum-zinc-coated steel (Bj LAS). The policy is not entirely new, as SNI certification for these product categories has technically been required since 2008 and 2009, respectively. What has changed is enforcement.

The Industry Ministry has framed the regulations as a quality and safety measure, as well as an effort to level a playing field that domestic producers have long argued is tilted against them. Officials noted that businesses had been given ample notice, with the regulatory framework published as far back as November 2024, and that a one-year grace period had already been extended to ease the transition.

The deadline, however, has arrived amid significant unease on the other side of the debate. Importers and downstream industries warn that the policy rollout is technically unready, with certification bodies and testing laboratories still lacking the capacity to process the required volume of applications.

The Association of Indonesian Steel Light Industry (Persibri) formally requested a postponement, warning that importers had already begun holding back purchases in anticipation of the new rules, causing domestic steel coil prices to spike by roughly 20 percent and stocks to run dangerously thin. The National Importers Association (GINSI) raised a sharper concern: With thousands of brands and companies required to obtain SNI certification simultaneously, and the process reportedly costing tens of thousands of dollars per certificate, the regulation risks triggering production stoppages, layoffs and opportunities for corruption.

Despite the government’s SNI intervention, the challenges facing Indonesia’s steel industry run far deeper than import competition and regulatory uncertainty alone. Even before the surge of cheap imports intensified, domestic steel producers had already been struggling with rising production costs fueled by global energy price volatility. Escalating geopolitical tensions in the Middle East have pushed oil prices higher, driving up transportation and logistics costs throughout the supply chain and placing additional pressure on manufacturers.

The burden is especially severe for steel producers that rely on electric arc furnace (EAF) technology, which depends heavily on stable electricity and gas supplies. Amid these mounting pressures, Indonesian Iron and Steel Industry Association (IISIA) executive director Harry Warganegara has urged the government to guarantee stable energy prices and supply, including by maintaining the subsidized gas price scheme (HGBT) and stable electricity tariffs. He argued that such measures are essential to restoring the sector’s competitiveness and ensuring its long-term survival.

The debate surrounding mandatory SNI implementation reflects deeper structural weaknesses within Indonesia’s steel industry. While the government views stricter SNI enforcement as necessary to protect domestic producers from unfair competition and low-quality imports, the policy risks becoming a short-term defensive measure rather than a long-term industrial solution.

Indonesia’s steel sector has long struggled with high production and energy costs, limited technological upgrading, dependence on imported raw materials and weak competitiveness compared with large-scale producers such as China. The controversy also exposes the government’s ongoing struggle to balance industrial protection with market readiness, as importers and downstream industries warn that inadequate certification infrastructure and regulatory uncertainty could disrupt supply chains and increase business costs.

Without broader reforms to improve energy security, industrial efficiency and investment certainty, mandatory SNI implementation may only slow the industry’s decline temporarily rather than address the root causes of its weakening competitiveness.

Ultimately, the crisis in Indonesia’s steel industry is about more than imported steel or regulatory disputes. It reflects the fragility of the country’s manufacturing base amid global economic pressure and inconsistent domestic policy execution. Without broader structural reforms to improve competitiveness, energy security and investment confidence, mandatory SNI may provide only temporary relief rather than a lasting solution for one of Indonesia’s most strategic industries.