South Korean steel giant POSCO announced on December 2 that it has reached a preliminary agreement with Indonesian state-owned steelmaker PT Krakatau Steel to build an integrated steel mill in Indonesia, Reuters reports.
Construction of the project, for which financial terms have not been disclosed, will begin in the second half of 2011, with the first phase with 3 million metric tons of capacity to be completed by the end of 2013, POSCO said in a statement.
POSCO has not yet set a schedule for the mill, to be located in the city of Cilegon, northwest Java, to reach its full production target of 6 million metric tons per year, a POSCO spokeswoman added.
However, Indonesian Industry Minister M.S. Hidayat told reporters in Jakarta that a joint venture agreement would be signed in April 2010.
The minister said that Indonesian steel consumption was set to drop 15-20 percent this year because of the global crisis, but had been returning to normal in the second half of the year.
Mr. Hidayat said he was optimistic domestic steel consumption could rebound next year to around the 2008 level of approximately 7.4 million to 7.6 million metric tons.
Meanwhile, Fazwar Bujang, president director of PT Krakatau Steel, told reporters in Jakarta that the agreement was to build a steel factory that could produce hot rolled coil (HRC), plate and slab.
"Most of the products will be used for domestic demand and some for export," Mr. Bujang said, adding that about 30 percent would be exported to Vietnam because POSCO had operations there.
Some production from the joint venture would also go to Krakatau Steel which currently imports 30 percent of its slab needs, he said.
He did not disclose financial details but said that a rule of thumb for the investment was that it would cost $1 billion for each 1 million mt of capacity.
The Indonesian media earlier quoted Bujang as saying that the investment would be $5 billion and that operations were set to start in 2013.
Mr. Bujang said that Indonesia's domestic steel demand was now about 10 million mt, while production from Krakatau Steel and other local steel makers was no more than 4.5 million mt.
"There will an increase of consumption of between 8-10 percent per year in the next four years," he added.