Indonesia~A long process from harbor to maker’s yard~

                                          IRUNIV 2013/07/29

Indonesia Indonesia, a country with population of 238 million people―twice as large as Japan―, 6 times as Korea.
 It is a mineral resources-rich country with a vibrant manufacturing industry as well. Particularly, the production of the transportation equipments is a lot, and 24% of GDP consists the manufacturing industry. GDP in 2012 reached a record 879,400 million dollars. GDP per person also reached a record 3,562 dollars. the economic growth rate is 6.1% in 2010, 6.5% in 2011, 6.2% in 2012, a developing country with a promising rising now. It's fair to say that it is the most expected country in Southeast Asia.
 There exist 10 companies of steel industry starting from the Krakatau steel (15 electric-furnace steel makers and are said to be 70 companies), but the steel production itself is stagnant around 4 million tons. However, in the future, that the steel production will grow and the scrap demand will increase, it's the country where the scrap traders of each country are paying attention to as a consumer market of new scrap.

Asking for T/T not L/C payment
According to the Indonesian local report, “First of all it's a certain that Indonesia demands ferrous scrap. It must purchase from overseas because the domestic outbreak is equal to nil. The demand is considerably a big-scale.” (local trade source), but the exports for this country from Japan do not increase that much. It seems that Marubeni Tetsugen, JFE Trading Company and some others ship their products partly. But there seems to be a problem in terms of finance, and there are quite a few companies that have second thoughts about it.
 Usually in the payment of the scrap trade, much transactions between banks are done by L/C. This payment method is popular due to the bank guarantee. However, it is said that T/T payment (a telegraphic transfer) is mainstream in Indonesian scrap trade. Because T/T is without any intermediary bank, severe documentation, bank charge, etc. needed in L/C are unnecessary. However, the greatest problem is that there is no guarantee in collecting the payment for goods. It is a risky payment which the money receipt is up to the importer. First, at Japanese trading companies, it will be difficult to succeed in business by T/T payment in transactions with Indonesia. Thus, the dealers and traders who are doing the scrap trade with Indonesia, for example, the big dealers such as SIMS does not exist, but it is said that there are many small traders called ○○ store in Japan.

The Mafia Check
 In addition, as the next problem, the Indonesian scrap market is quite being occupied literally by local Mafia (called gangster organizations in Japan). There is a mafia check in the way from the harbors to the steelmakers. Therefore, it is said that the scrap will be taken inevitably, or you cannot pass if you do not hand any money (reported from a local source). For that reason, Indonesian scrap was not a bulk, but commonly became a container. It is said that if you overload and pile up the scraps on a truck like Japan, they from adults to children are bold to clamber up truck by all means, or perhaps I should say it is usual. Actually, there are people who witnessed the scene that children crowded the trucks left the maker’s yard .
 It is Indonesian scrap market with public security problems, such as the anxiety of security and the anxiety of financial terms. In the market of mafia as the leading role, it is not surprised that the major scrap dealers of the developed countries including Japan are far to expand. (*However, in some part of Japan there also seems to be many scrap business which the people of gangster organizations taking part in deeply…)
 Africa (i.e. Cape Town) is serious too, but in promising Indonesia at "do-or-die", creating the order of the scrap market will also leave a great footprint on Indonesian scrap business history. It is Indonesia with mounting problems and tasks. To be continued.
(IRUNIV Susan)

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