Indonesia, Jordanian firm ink deal to build fertilizer factories

Two state fertilizer companies signed on Wednesday a memorandum of understanding (MoU) with Jordan-based company PT Jordan Phosphate Mine Corp. (JPMC) to construct three Nitrogen, Phosphorous and Potassium (NPK) fertilizer factories.

The two companies are PT Pupuk Sriwijaya (Pusri) and PT Kalimantan Timur (Kaltim).

“We expect this joint venture will support our long-term plan to become the world’s biggest fertilizer producer,” Mustafa Abubakar, the state minister for state-owned enterprises, who witnessed the signing ceremony, said.

Walid Kurdi, the president director of JPMC, said his company would supply rock phosphate for the three new factories for the next 20 years.

Arifin Tasrif, the president director of Pupuk Sriwijaya, told reporters that the new factories required a total investment of $900 million and that Indonesia would secure a 50 percent ownership in the factories.

“Approximately 70 percent of the capital will come from bank loans,” Arifin said. He added that Pusri and Kaltim would disburse $135 million in capital each for the factories.

“The rest of the required capital will be provided by bank loans, local or international. We have talked to the state banks to finance the construction,” Arifin said refusing to state the names of the banks.

The three plants will be constructed in Gresik, in East Java, Bontang in East Kalimantan, and in Tanjung Siapi-Api, in South Sumatra.

“These plants will produce 3 million tons of NPK annually, thanks to the rock phosphate provided
by Jordan as we don’t have the basic materials to produce NPK,” Arifin said.

He said the first NPK factory would be built in Gresik this year. The joint venture expects to accomplish the construction within 30 months, he added.

“The [initial work] will be on Saturday. We hope all of the factories will be ready to begin operating by 2015,” Arifin stated.

Minister Mustafa said most of the output from the factories would be allocated for domestic demand.

At present national fertilizer consumption is about 14 million tons per year. The government predicts that by 2025 Indonesia will need about 23.2 million tons of fertilizer per year to meet demand.

“NPK now is very important for plantations and farming. It is more efficient and effective than the fertilizer mixes that our farmers usually use,” Arifin said.

At present Indonesia produces 2.2 million tons of NPK. The government has set a target to produce 8 million tons of NPK a year by 2025.

“We will be able produce at least 5.2 million tons of NPK annually after these factories commence production,” he said.