Indonesia's steel demand is expected to rise this year on the back of new government infrastructure projects. The strong recovery in steel prices has also prompted steel mills in the country to boost utilisation rates this year after suffering low productivity in the past two-to-three years.

The country's steel demand is expected to rise by 8% this year from last year's finished steel consumption of 12.7 million tonnes, Hidajat Triseputro, executive director of the Indonesia Iron and Steel Industry Association tells Kallanish. Last year's Indonesian steel demand was 11.4% higher than 2015's 11.4mt.

This year's surge in steel prices has spurred Indonesian steel mills to ramp up capacities. Hidajat expected utilisation rates to exceed 70% this year. Last year, rates were averaging 40% with many mills opting to stop producing billet because it was more competitive to import Chinese billet.

Rebar prices in Jakarta have risen to prevail at around IDR 9,000/kilogrammme ($679/tonne) including 10% vat, from IDR 5,500/kg earlier this year. Hidajat said association members are receiving strong orders for both long and flat products. He believes this will also be the case for next year on the back of the slew of new government infrastructure projects.

'We are told that there is a shortage of wire rod,' Hidajat says. He has heard that prices have risen sharply and those mills which suspended capacity are mulling restarting operations in the country. Limited raw materials such as scrap, energy prices and the global shortage of graphite electrodes are negative factors affecting the industry, he adds.

The Indonesian government has set its priorities on infrastructure projects and will allocate state budget funding of IDR 455 trillion ($35 billion) in 2018. This is an increase of 17.4% compared to this year.