PESTLE Analysis

P – Political

a. The National Iron and Steel Industry Association (IISIA) in connection with Krakatau Steel, supports
efforts to increase industrial competitiveness currently planned by the government through the
deregulation of imports of iron or steel and its derivatives. By considering the right time and
optimal preparation and taking into account the condition of the national steel industry whether it
has been at its optimal utilization. That is, one of which will be deleted is a recommendation letter
or technical consideration for the importer-producer identification number (API-P).
b. The application of anti-dumping import duty (BMAD) on Hot Rolled Coil (HRC) by the government
has provided protection for the domestic industry and fraudulent business practices. The
application of BMAD also ensures that downstream steel producers obtain quality steel according
to Indonesian National Standards (SNI).
c. The government's policy in opening import taps from five countries (Russia, Taiwan, Thailand,
China, and India) accompanied by the consequences of paying higher import duties than other
countries causes Indonesia Steel Company be able to compete competitively.
d. The Ministry of State-Owned Enterprises has increased the number of privatized BUMNs, where
majority ownership of shares will be released by the method of initial public offering (IPO) and
strategic sales. With PT Krakatau Steel (maximum 30 percent IPO). This government policy is to
strengthen the revenue side of the state budget and make SOE performance more shiny. Because
by being a public company, the company's management is required to comply with capital market
regulations, with one of the pillars being the principles of good corporate governance.

E – Economic

a.

S – Social

a. Protection of the domestic industry which is a producer of raw materials will greatly affect
employment, and if the decision is right, then thousands of workers who work in HRC factories will
be protected.
b. PT Krakatau Steel's board of directors program in which in difficult circumstances must restructure,
one of which is pursued by laying off employees for 1-2 months.
c. The establishment of a union that has been established since 1999, known as the Krakatau Steel
Employee Union (SKKS), which lasted for 2 years, has established a good relationship between the
company and the union so that it has never experienced strikes, demonstrations, or interference
from other employees arising from disputes with employees.
d. Student organizations in the city of Cilegon agreed and supported the government to strengthen PT
Krakatau Steel, due to the many benefits provided to the community in making a living and the
many office offices standing on the Krakatau Steel land. And because another thing is that if the
SOE does not hold the steel industry, then private companies like China will occupy their position,
because one way to improve social and economic conditions and improve the welfare of the
people, it is necessary to increase the absorption of downstream industrial workers.

T – Technological
IT implementation in the Company is carried out using several approaches, including:

a. For the corporate level, the Company has used the Enterprise Resource Planning (ERP) based on
SAP ECC 6.0 which integrates all core business processes. To complete the ERP application in the
supporting functions, the Company has developed an online (web) based application.
b. To manage and optimize the production process, the Company has implemented a Manufacturing
Execution System (MES) for the production facilities of Long Product at DRP, BSP and WRM plants,
as well as the production facilities of Flat Product at SSP, HSM and CRM plants.
c. In addition, the Company has utilized process automation technology to control the production
process in all production facilities.

L – Legal

a.

E – Environmental

The Company’s commitment to be responsible for the Environment is carried out through various
programs managed by the Company through the Health, Safety and Environment (HSE) Division. The
Company’s activities in the context of environmental management include the Environmental
Management Program, which consists of:

a. Water Pollution Control

All units of production at PT Krakatau Steel (Persero) Tbk have a Water Treatment Plant (WTP) and a
Waste Water Treatment Plant (WWTP) unit. In processing domestic wastewater, the Company has
operated a Sewage Treatment Plant (STP). Regarding water pollution control, the Company
completes it with personnel who are certified competency as Water Pollution Control Manager
(MPPA).
b. Air Pollution Control
The production unit at PT Krakatau Steel (Persero) Tbk, is equipped with air pollution control
facilities such as Dedusting System, Chimney emission, Continuous Emission Monitoring System
(CEMS), Ambient Air Quality Measuring System (AAQMS). Regarding air pollution control, the
Company completes it with competent certified personnel as Air Pollution Control Manager (MPPU).
c. Industrial Waste Management (B3 and Non-B3)
The Company complements B3 waste management facilities and infrastructure, such as:
● Having a licensed temporary storage place (TPS) for B3 waste.
● Has a Sludge Drying Bed (mud dryer means) to speed up reducing water content before being
used as raw materials in the cement industry.
● Slag Atomizing Technology (SAT) for processing slag into SNI licensed PS Ball products.
● Metal Recovery Plant (MRP) to recover metal in steel slag, so that the recovered metal is reused
again and steel slag is processed into raw material/aggregate material for the foundation and
bottom layer as well as selected/raw material for road construction, according to with SNI.
● Briqueting & Fines Sponge Blocking technology to process sponge fines into briquet and block to
be made as raw material again.
● Acid Regeneration Plant (ARP) to treat HCL waste.
 ● Filter Press to treat mud to form solids.
● Means of sorting waste according to type.
d. Biodiversity
The Company has a biodiversity conservation program by making urban forests in the Company’s
area, it can increase the biodiversity of fauna. The company is actively reforesting. Shady trees that
have been planted by the Company act as lungs for Cilegon City and Banten province to maintain
ecosystem balance, increase fauna biodiversity and also reduce the risk of global warming.
e. Green Company
As a form of commitment to environmental conservation efforts, the Company planted trees in the
surrounding environment at the beginning of each rainy season. The initiative was accompanied by
the Company’s commitment to green the city of Cilegon by planting thousands of trees consistently.
This effort encourages the Company to grow as a green industry. The number of trees planted up to
2018 as many as ±1,655,651 trees.

Porter’s Five Forces Model

Threat of Potential New Entrants: High

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of Substitutes

Intensity of Rivalry
Opportunity
- Increasing national steel demand.
- Increasing global steel demand.
- Indonesia has many natural resources containing raw materials used in the processing of the steel
industry, namely in the form of iron sand and iron ore.

Threat
- An invasion of imported steel production surpluses
- Cheap prices for imported steel.
- Political trade (dumping) from other steel producing countries.

Strength
- PT. Krakatau Steel already has the ability to meet the needs of steel for the needs of the national
defense industry in accordance with the required standardization.
- The largest steel mill in Southeast Asia, so it is expected to be able to dominate the market in the
regional area.
- Has an integrated steel production facility.

Weakness
- Production capability that continues to decline compared with the increased need for steel
consumption.
- Many raw materials for steel making are imported so prices are not competitive.
- The investment price of developing a steel plant and its expensive processing.
- Still lack of skilled and expert human resources in steel processing technology engineering.