Krakatau Steel, Southeast Asia's largest steelmaker, is in talks with miners Borneo Lumbung Energi and Marunda Graha Mineral to help meet coking coal demand.

It plans to increase iron production using a blast furnace in addition to its existing DRI facility.

This would be the first use of coking coal by Krakatau, which currently uses natural gas to produce DRI.

Armed with $301M from a listing on the Jakarta stock exchange last month, it said it would consider taking equity stakes to secure the coal supply. Krakatau expects to consume 2.65mt of coking coal by 2014 to fuel steel mills for its own projects in Cilegon, West Java, as well as its $6bn joint venture project with South Korea’s Posco.

The company expects to produce 2.8Mt of steel in 2011, including 2.2Mt of hot-rolled coil, compared to an estimated 2Mt in 2010. Krakatau is also trying to source more iron ore locally and is in talks with the state government in western Aceh province about developing iron ore.

Krakatau expects to produce 300kt/y of sponge iron from 2011 from a project in southern Kalimantan together with state miner Aneka Tambang.