Indonesia’s steel maker PT Gunung Gahapi Sakti and China’s major diversified group Fosun International Ltd will jointly build a steel mill in Medan, North Sumatra to tap into the country’s growing demand for steel products.
Executives from both companies revealed the business plan during a meeting with Industry Minister MS Hidayat and other industry officials on 3 May 2013 in Jakarta.
Mr Panggah Susanto said the two companies would spend up to US$200M on the construction of the steel plant.
He added that the development of the steel plant, estimated to take three years, would run in two phases, with each phase absorbing $100M.
In the initial stage of operation, a blast furnace and steel shop would be built with an initial capacity of 500kt/y to produce slabs and billets, but output would gradually increase to 1t/y.
The plan is to use locally available iron ore from Aceh and Padang as two potential sources of raw material.
Currently, some local steel plants still use obsolete technology, making them dependent on imported raw materials, such as steel scrap or certain types of iron ore.
Indonesia has seen its national steel consumption rise, driven by robust demand from construction, infrastructure and the automotive sectors.
Domestic steel use is expected to expand by between 6 and 9% this year from 10.4Mt in 2012, according to an estimate by the Indonesian Iron and Steel Industry Association (IISIA).
Presently, Indonesia imports 35 to 40% of its steel as local capacity cannot meet domestic demand in terms of volume and specific grades.
Seeing the huge opportunities in the domestic market, several firms are upgrading their capacity to cope with rising demand. Indonesia’s biggest steel producer Krakatau Steel, for example, is teaming up with the world’s third-biggest steel maker South Korea’s Pohang Iron and Steel Company (Posco) to set up a steel plant in Cilegon, Banten, with an investment of $6bn. It is also constructing a blast furnace on its own near its existing plants in Cilegon with an anticipated investment of $601M. Presently, the company produces DRI to feed electric arc furnaces.
Source: Daily ‘The Jakarta Post’, Jakarta; 4 May 2013