Global Business Guide Indonesia

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Growth Steel Group | Mr Fadjar Suhendra
Mr Fadjar Suhendra

As an Indonesian industrial group, we want to establish partnerships that bring in new technology and benefit the country in terms of employment

Mr Fadjar Suhendra , Chairman & CEO

Growth Steel Group, through its subsidiary companies, operates steel mills and foundries and has taken an active role in offering value added processes. What can you tell us about your group’s background and its strategies going forward?

Growth Steel Group was established in 1969. While our oldest company within the group, Growth Sumatra, was initially focused on meeting the needs of the local market, Growth Steel Group as a collective unit takes a wider approach, focusing on the export market and we provide steel liners to the mining sector all over the world as well as in Indonesia.

It is our strategy going forward to continue to engage in exports while also taking advantage of a domestic market with considerable potential. We expect that steel production in Indonesia will increase from its current level of 35 kg per capita which is very low compared to Malaysia and Thailand with more than 100 kg per capita, as there is a need to accelerate infrastructure development. The new regulations for land acquisition announced in 2012 will enable infrastructure development to move forward, and these types of projects will require steel for construction. In 2014, the new regulations regarding the ban on unprocessed minerals will also take effect so natural resources will remain in Indonesia. Iron and nickel for smelting for example will be processed to produce steel and so the value added will be retained in the country.

What are Growth Steel Group’s main competitive advantages as a steel product manufacturer?

Four years ago we established a blast furnace to produce nickel pig iron using nickel iron ore. This blast furnace can be used for normal pig iron as well. Our company PT Indoferro, which began operating in 2012, is already exporting 150,000 MET of nickel pig iron per year to stainless steel companies. Our group is well positioned in a country that has very large deposits of nickel ore and we believe that Indonesia will become a major producer in this field; at the moment the country exports a large amount of ore to countries such as Japan and China and after 2014 it must be processed prior to being exported. Indonesia will have to build its own smelting industry to supply the global market and our group is poised to offer its value added processes.

From nickel pig iron you can also produce stainless steel for downstream products which Indonesia also has a large market for. Our company is always willing to adapt, and we are therefore switching from commercial steel to stainless steel for personal consumption. We are already supplying stainless steel to Acerinox of Spain and companies from India and Taiwan. Acerinox is also very interested in entering Indonesia with us to cooperate for upstream production. Commercial steel is highly competitive so stainless steel will be a new area of focus for us.

Having already established a comprehensive export network, what are Growth Steel Group’s plans for expansion? What are the hurdles faced by the group in carrying out these plans?

Today we are supplying our steel liners to mining companies in Australia, Africa and South America. We supply more than $150 million USD in steel liners and I believe we can supply up to $500 million USD of this product. 

Therefore, where there is an active mining industry we have a lot of potential to provide specialised steel.

Logistics and infrastructure are a challenge in Indonesia, as they add costs to your product for export, particularly for low value added products. For high value added products, the impact is not as great as a percentage of the cost. When changes and improvements in these areas need to be discussed with the government, it is necessary to proactively approach them as opposed to waiting for them. You have to dedicate a lot of time to providing feedback and input to the government.

What can you tell us about your group’s innovation priorities and new services to be introduced in the future?

I believe it is very important to have a good research and development department that is given sufficient time and funds. We have tried to innovate in terms of transport methods and distribution, so that we can deliver our steel products directly to the end user. Previously you had to use a large carrier vessel for scrap steel or edible oil products to transport from country to country. Now by using smaller container vessels you can avoid the wholesaler and go directly to the company which is more efficient, lowers costs and uses less energy.

Is Growth Steel Group interested in working with foreign investors looking for local partners in the Indonesian steel industry?

We are currently considering partnerships in the downstream stainless steel sector with overseas partners and manufacturers. In a potential partner we are seeking technical expertise and capital for ventures.

China is a major steel consumer and they mainly import semi-finished products so we would be interested in working together to produce finished products for the market.

We believe that to be competitive, a company cannot stand alone and must work with partners for technology, expertise and capital. Indonesia must make use of the competitive advantages that other countries have to offer; this country does not have expertise in aviation equipment for example so it should not focus on this area but can instead find strategic partnerships to still make a contribution to the sector.

What would you like our readers to remember about Growth Steel Group as a final message?

As an Indonesian industrial group, we want to establish partnerships that bring in new technology and benefit the country in terms of employment. At the moment we are focusing on projects in renewable energy as we already invested in a 100 MW biomass plant and now we are moving to wind power. Environmentally, we have a responsibility to explore and develop wind energy as it has proven to be successful in markets such as the UK; this is not for commercial gain and profit but for the country’s future. For wind generation we are therefore looking for partnerships in this field to work together in Indonesia.

Global Business Guide Indonesia - 2014

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