Indonesia is expected to import 3 million tonnes of steel billet in 2012, up from 1 million tonnes in 2011, after the local authorities tightened import procedures for scrap metal, restricting domestic supply.

About 70% of Indonesia's scrap consumption is imported, but new obstacles to such imports, raised after some shipments were found to have been mixed with hazardous waste materials, mean many iron and steel companies are switching to billet as a raw material for making steel products.

Mr Edward R Pinem executive director of the Indonesian Iron and Steel Industry Association said that "The scrap supply from the international market has been declining significantly."

Mr Pinem said that the new import regulations had led to 7,000 containers of imported scrap being held at several ports across Indonesia since the start of the year. He added that scrap imports this year were expected to total 3 million tonnes, down from 5 million tonnes in 2011.

Mr Panggah Susanto director general of manufacturing industry at the industry ministry said that the move had caused scrap prices to double to USD 800 per tonne since 2011. He added that "The regulations have led to a shortage of raw materials at 132 iron steel smelting companies. The increase in demand had pushed billet prices to USD 700 per tonne in 2012 from USD 600 in 2011."

He said that steel billet would likely be imported from China and countries in Eastern Europe. China, the world's biggest steel consumer and producer, made 881 million tonnes of steel products in 2011, of which nearly 49 million tonnes were exported.

Mr Susanto said that Indonesian iron and steel smelters normally use three kinds of raw materials like pig iron, sponge iron and scrap, most of which are supplied from the international market.