The national industry is facing multiple pressures, including rising steel and aluminum prices, rising raw material demand, and a renewed surge in imports. Bali is one of the regions recording a significant increase in imports of machinery, precious metal components, and other industrial equipment. This increase demonstrates improving industrial performance, but also reveals new risks that businesses must address.
In these conditions, industry players want to move quickly, modernize production, replace old machinery, and increase capacity. However, the reality is that not all industry players can afford new machinery. As a result, importing older machinery has become an increasingly popular option. Unfortunately, this carries significant risks: the machines are more susceptible to damage, require special handling during shipping, and represent a significant investment. If damaged in transit, potential losses can reach billions of rupiah.
As a professional insurance broker specializing in logistics risks and machinery import insurance, L&G Insurance Broker presents this review. We recognize that any decision to import machinery currently carries a significantly greater potential loss. We will examine why comprehensive machinery import insurance is the absolute solution to protect your high-value investment. The Indonesian steel and machinery industry is facing a crisis due to aging production machinery and a flood of cheap imports. Ironically, the quick fix, namely importing machinery for efficiency, has actually increased logistical risks. With high steel and aluminum prices, the value of imported machinery shipments has become prohibitively expensive. We will thoroughly explore the secrets of risk management and why brokered machinery import insurance (ICC A) is the key to obtaining competitive premiums and maximum protection. Contact L&G Insurance Broker now on 08118507773 for free consultation before any risk occurs.
A New Phenomenon in the Industry: Increasing Imports of Old Machinery
The issue of importing old machinery has resurfaced after the Ministry of Industry provided an official explanation during a working meeting with Commission VI of the Indonesian House of Representatives. In an official statement, Deputy Minister of Industry Faisol Riza emphasized that the Indonesian steel industry is facing serious challenges, not only from a flood of imported products but also from production equipment.
At the conference, he said:
“Most of the machinery used by the national steel industry is old and not fully environmentally friendly. This makes production costs high and our product quality uncompetitive,” said Faisol.
Imports of old machinery have also increased as many companies try to fill capacity gaps without significant capital investment. These machines are imported from major manufacturing countries such as China, Korea, and several European countries. However, a new problem has emerged:
- The risk of damage during shipping is much higher
- Spare parts are often unavailable
- Quality standards do not always meet industry needs
- The investment value is at risk of being lost if it is damaged before it can be used.
This phenomenon encourages insurance brokers to play a more active role in risk mapping and risk mitigation for imported machines with long service lives.
Current Challenges of the Indonesian Steel Industry
In an official report, the Ministry of Industry outlined several major problems currently facing the national steel industry:
1. Flood of Imported Products 55% of National Needs
According to the Deputy Minister of Industry’s statement quoted by the media:
“The gap between production capacity and demand is filled by imports, with around 55% coming from China. Our steel industry is only utilizing around 50%,” he said.
This means that more than half of the nation’s steel needs are met by foreign products. The domestic industry is at risk of losing its market share.
2. Production Focuses Only on Steel for Construction
Indonesia still has minimal production of high-value steel such as:
- alloy steel
- special steel
- steel for automotive, heavy equipment, and shipping
- Even though this segment is a high value market.
3. The factory machines are old
“Most of the machines are old and not environmentally friendly. Production costs are high, and quality is uncompetitive,” he explained.
This situation encourages companies to import old machines as a quick solution, thereby increasing logistical and operational risks.
4. Global Competition is Getting Tighter
Even China, which produces 53.3% of the world’s steel, is seeking new markets due to the property sector downturn. Cheap goods from abroad will continue to flood countries with loose regulations.
The Impact of the Old Machine Phenomenon on Business Actors
When steel and aluminum prices rise, industry automatically holds back expansion. However, the need for new machinery remains, so older machinery becomes an alternative. The impact:
- The risk of damage during shipping increases: Because the components are weak or less stable.
- The machine can be damaged before installation: This case often occurs with machines purchased from Europe and America.
- The investment value is not comparable: Although cheaper, repair costs can be the same as a new machine.
- Higher risk of production downtime: Older machines require intensive calibration and maintenance.
Therefore, each stage of the import process must be mapped in detail—including the mode of transportation, packaging, and even the condition of the machine upon unloading.
Why Do Businesses Need Insurance Brokers?
Amidst the increasing import of old machinery, the role of brokers has become very important, not just as policy providers, but as risk advisors.
Here are the strategic roles of brokers like L&G Insurance Broker:
1. Mapping Specific Risks for New and Old Machines
Brokers perform risk mapping based on:
- machine age
- investment value
- shipping route
- mode of transportation (sea, land, air)
- potential for corrosion/internal damage
- packing and handling
Old machinery should be treated as high-risk cargo. Not all companies are aware of this.
2. Determine the Right Type of Protection
Each machine requires different protection.
The broker will determine:
- appropriate protection coverage
- what exceptions should be anticipated
- additional protection if the machine is at high risk
- special conditions recommendations for importing old machines
3. Handling Claims When Damage Occurs
This is the most important part. The broker is responsible for:
- oversee the claims process from start to finish
- ensure complete damage report
- communicate with surveyors, port authorities, and logistics companies
- speed up the payment process
For imported older machinery, claims are often more complicated because strong evidence of damage is required. Brokers ensure everything is documented.
4. Provide Risk Recommendations
Industry players receive comprehensive reports on risks and solutions, such as:
- recommended packing methods
- container type
- machine treatment before shipping
- protection against rust
- the correct way to document a strong claim
This is what differentiates a broker from just an ordinary policy agent.
The Strategic Role of L&G Insurance Brokers in Imported Machinery Delivery
Amidst the increasing risks of logistics and imports of old machinery, L&G Insurance Broker plays a vital role as a strategic partner for machinery importers and the national steel industry.
Why Machinery Importers Need Insurance Brokers:
- Comparing Wording and Prices (Market Placement): Brokers have access to dozens of insurance companies (including global markets) to find the most competitive machinery import insurance premiums. We ensure you get an ICC A (All Risks) policy as the minimum standard for high-value machinery.
- Insured Sum Audit: L&G helps importers update their sum insured in real-time to avoid catastrophic under-insurance amidst rising metal prices.
- Negotiating Special Clauses: For imported machinery shipments, brokers negotiate mandatory endorsements such as Mechanical Derangement (mechanical damage), Rust & Oxidation (rust), and Forklift Damage (during loading and unloading). Standard policies do not cover these, and without them, claims for precision machinery damage will be denied.
- Total Claims Advocacy: Imported machinery insurance claims are often complex. L&G takes full responsibility for overseeing the claim, from surveyor reports to payment, ensuring timely disbursement of funds.
Insurance and Risk Management Recommendations for Machinery Importers
L&G Insurance Broker advises machinery importers to implement these protection strategies to secure imported machinery shipments and industrial investments:
- Marine Cargo Insurance ICC A: Choose ICC A (All Risks) coverage as the minimum standard for machinery imports, and do not rely solely on ICC B or C.
- Corrosion Coverage Extension: Make sure your policy includes an extended Rust, Oxidation, & Corrosion Clause for steel and aluminum precision machinery.
- Shipping Documentation: Require suppliers to provide a packing list and photos of the machine before shipping. L&G can assist in developing a documentation protocol to support claims.
- After Arrival Protection: For imported machines that have arrived and been installed, protect them with Machinery Breakdown (MB) Insurance and Property All Risks (PAR) Insurance for the risk of fire or natural disasters.
- Handling Security: Use a forwarder service that has a certified heavy equipment handling SOP, which will be an added value in negotiating machinery import insurance premiums.
The Link Between Rising Steel Prices and Increased Machinery Imports
When steel and aluminum prices rise, many companies postpone expansion. However, production lines must remain running. As a result:
- they chose the cheaper older machine
- production can still be carried out even though capacity is limited
- cash flow remains safe
But behind that, the risks increase:
- old machines are prone to damage
- major repair costs
- production downtime can be costly
Damage during import is not easy to claim without broker assistance. This phenomenon encourages the need for more mature protection, especially for construction, furniture, metal, electronics, automotive, and food manufacturing companies.
Conclusion
The national industry is entering a highly dynamic and challenging phase. Rising steel and aluminum prices are impacting the industrial chain from upstream to downstream, forcing many companies to hold back expansion and seek more affordable alternatives. In these conditions, importing older machinery is becoming a growing trend. While cheaper, the risks involved are far greater, from potential damage in transit to repair costs and production downtime, which can cost companies significant amounts of money.
The Ministry of Industry’s official statement regarding aging machinery in steel mills reinforces the notion that Indonesia’s industrial modernization is indeed hampered by outdated technology. However, even importing aging machinery is not without risks. This is where insurance brokers play a crucial role, bridging industry needs and asset protection. Brokers can provide in-depth risk mapping, ensuring each piece of machinery, both new and old, receives appropriate coverage, and assist with the often complex and time-consuming claims process.
For industrial modernization to be effective, every investment, especially those involving high-value machinery, must be managed professionally and measurably. Early protection is no longer an option but a strategic necessity for companies to remain competitive. Therefore, working with an independent insurance broker like L&G Insurance Broker is the safest way to safeguard investments, mitigate potential losses, and ensure companies can focus on improving quality and production capacity.
Source:
- https://www.cnnindonesia.com/ekonomi/20251110125051-92-1293838/wamenperin-ungkap-masalah-industri-baja-ri-banjir-impor-dan-mesin-tua
- https://www.bloombergtechnoz.com/detail-news/89854/kemeperin-beber-kemelut-industri-baja-ri-banjir-impor-mesin-tua/2
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