Indonesia’s steel industry is operating amid changing manufacturing conditions following a moderation in factory activity in August 2026. The S&P Global Indonesia Manufacturing Purchasing Managers’ Index (PMI) declined to 49.8 in August from 50.2 in July, moving slightly below the 50-point level that separates expansion from contraction. According to The Jakarta Post, renewed declines in output and employment weighed on the August reading, while new orders increased slightly for the first time in three months.
Manufacturers surveyed for the PMI attributed the decline in output to factors including stronger competition, subdued demand and higher input costs. Production declined for the fifth time in six months, while employment also returned to contraction territory. However, the increase in new orders indicated broadly stable incoming demand during the month.
For the steel industry, domestic consumption had increased before the latest moderation in manufacturing activity. The Coordinating Ministry for Economic Affairs reported in February that steel consumption rose from 18.6 million tonnes in 2024 to 19.3 million tonnes in 2025, with demand coming from construction, manufacturing and automotive industries. National steel production capacity was estimated at around 16–17 million tonnes per year, while utilization remained below 60–70%.
Speaking at the Indonesian Iron & Steel Industry Association’s national congress in February, Coordinating Minister for Economic Affairs Airlangga Hartarto highlighted the performance of the broader basic metals industry. “In 2025, our metals industry recorded an impressive achievement,” Airlangga said, as quoted by the Coordinating Ministry for Economic Affairs, noting that the sector’s GDP growth reached 15.71% in 2025. The government has also identified global steel oversupply and increasing trade protectionism among the external developments affecting the industry.
Trade data show that both imports and exports of iron and steel increased during the first seven months of 2026. Ministry of Trade data recorded iron and steel imports under HS 72 at USD 6.22 billion between January and July, up 15.32% from USD 5.39 billion in the same period of 2025. Iron and steel accounted for 4.52% of Indonesia’s non-oil and gas imports during the period.
Exports of iron and steel under the same HS category reached USD 16.54 billion between January and July 2026, an increase of 2.77% from USD 16.10 billion a year earlier. The commodity represented 10.34% of Indonesia’s non-oil and gas exports during the period. As a result, iron and steel recorded a trade surplus of USD 10.32 billion in the first seven months of 2026, making it one of the largest contributors to the country’s non-oil and gas trade surplus.
The government has continued to focus on domestic steel competitiveness, downstream development and measures related to the domestic market. In February, the Coordinating Ministry for Economic Affairs said these efforts included strengthening downstream processing and domestic industry protection, alongside the development of lower-carbon steel production. Airlangga also pointed to the need to respond to global excess capacity and changing international trade conditions affecting steel producers.
