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The deferment, announced this week, is to allow time for Indonesian companies to adjust to the new regulation, though shorter than the three-month deferment that some importers had asked for, a source familiar with the situation told Steel First late on Thursday June 26.

Under the new policy – which was initially to come into force 30 days after its enactment on June 2 – Indonesian companies will need to receive government approval to import alloy steel.

The 30-days deadline is insufficient to comply with the new requirements, the Indonesian source, a director at a local wire drawing mill, said.

Goods that have been ordered prior to the new ruling may be affected by technicalities later when they arrive, he added.

A lack of clarity on the importation procedures is also not helping the situation, he said.

The regulation – which will affect imports of steel under HS codes 7225 to 7229 – has sparked concerns among local wire drawing mills, which use wire rod as raw materials. They recently met with government officials to appeal the decision, in particular against imports declared under HS code 7227 which covers alloy steel bar and rod.

The local wire rod production is not enough to meet domestic demand, the source said.

Indonesian steelmakers produce about 1-1.2 million tpy of wire rod, while the local industries use about 2.4-2.6 million tpy.

Apart from insufficient local supply, wire drawing mills also import alloy steel wire rods because of their competitive prices compared with domestically produced ones, the source said.

While non-alloy material under HS code 7213 are not affected by the new ruling, there are not many offers of such wire rod in the market, he added.

Exporters in China receive a rebate from their government when they sell alloy steel products overseas, but they do not enjoy the same incentive for the export of non-alloy steel products, he explained.

Most steel imports into Indonesia are Chinese materials. Indonesia is implementing the new regulation in a bid to curb rising alloy steel imports and minimise unfair trade practices, which the government felt can harm the country's iron and steel industry.