Indonesia’s largest steelmaker, PT Krakatau Steel (KRAS), plans to spend up to US$400M on a new hot strip mill next year as part of its expansion plans. The firm is conducting a feasibility study and should begin land acquisition gradually by the end of this year, president director Irvan Kamal Hakim said in Jakarta.

The company has yet to pick a location for the new facility, but the firm expected to develop in a new area, in a possible exchange of a 40-hectare plot which it was ready to release to Asia’s second-largest petrochemical producer, Honam Petrochemical Corp, he added.

The South Korean petrochemical giant reportedly plans to invest around $5bn to build a petrochemical complex in Cilegon, Banten, where major petrochemical plants are concentrated and KRAS is building a blast furnace and a stee lmill, the latter in a jv with South Korean steelmaker Posco.

The capacity of the plant will be 1Mt/y and start-up is anticipated for 2015. The plant will include a hot strip mill, the largest share of output going to the domestic market, which sees significant demand for steel as the economy grows.

At present, Krakatau’s hot strip mill has a capacity of around 2.4Mt/y and its total rolling capacity is around 3.2Mt/y from the existing hot strip mill and wire rod mill, bar mill and section mill.

The planned hot strip mill is expected to help the firm to upgrade total rolling capacity to 4.25Mt/y.

To finance the new mill project, Krakatau will use funds generated from its initial public offering, according to Irvan. The firm raised Rp2.68 trillion ($281.11M) from floating its shares on the stock exchange in November 2010.

Apart from this expansion plan, Krakatau, which presently makes all its iron via the DRI route, is building a blast-furnace complex in Cilegon, near its existing steel plants, with an anticipated investment of $601M.

Construction is being undertaken by its subsidiary PT Krakatau Engineering and Chinese state-owned firm Metallurgical Group Corporation — Capital Engineering and Research Incorporation Ltd (MCC-CERI). Start-up is planned for 2014 when it will produce 1.2Mt/y of pig iron.

The firm recently obtained a $200M syndicated loan from Chinese banks — China Development Bank Corporation (CDB), the Industrial and Commercial Bank of China Limited (ICBC) and The Hong Kong and Shanghai Banking Corporation Limited (HSBC) — to build the blast furnace.

Earlier, it also secured similar syndicated credit totalling $250M from state-owned banks — Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Rakyat Indonesia (BRI).
Krakatau has also entered an advanced stages of development of its $6bn plant in Cilegon, in a joint venture with South Korean steel giant Pohang Iron and Steel Company (Posco).
The plant is designed to produce 3Mt/y of steel slabs and plates and will come into commercial operation at the end of 2013.

As the economy grows, the development of new steelmaking facilities is crucial in Indonesia, Southeast Asia’s largest economy, as it will help improve the structure of the local industry that still relies heavily on imports, experts say
Source: Daily The Jakarta Post, Jakarta; 29 Aug 2012