T

hree iron ore plants with a combined investment of US$470 million are slated to begin operations in 2012 with a priority of meeting surging local demand.

The Industry Ministry’s director for base metal industries I Gusti Putu Suryawirawan said on Tuesday that construction of the plants was between 70 and 80 percent complete and they were due to start operating in the first and second quarters of next year.

“Our annual demand for steel has settled at around 10 million tons, while we can only produce 6 million tons. We expect the plants’ output will help supply materials for steel production,” he told The Jakarta Post in a telephone interview.

The plants belong to PT Meratus Jaya Iron and Steel, a joint venture between state steel-maker PT Krakatau Steel and state mining company PT Aneka Tambang (Antam); PT Mandan Steel in collaboration with Chinese Zhengzhou Yong Tong Special Steel Corporation and PT Indoferro, a subsidiary of Growth Steel Group.

Putu said that the approximately $120 million Meratus plant, located in Tanah Bumbu regency, South Kalimantan, would produce some 315,000 tons of sponge iron for steelmaking once it began operations in March or April.

He said the output would supply Krakatau Steel’s plant in Cilegon, Banten, which hitherto imported the materials from Brazil.

The Mandan plant, also in Tanah Bumbu and costing approximately $220 million, is slated to commence operating in the first half of next year at the latest, Putu said, it would yield around 1 million tons of billet iron per annum.

“The billet iron is to make components of train wheels and ball bearings. The output will be allocated according to market needs but it will prioritize the domestic market wherever possible,” he explained.

The Indoferro plant in Cilegon, with an investment of $130 million, would produce 500,000 tons of pig iron for Growth’s plant in Medan, North Sumatra. The plant was set to open in May, Putu said.

Higher domestic demand for steel, a key material in the automotive and construction sectors, has led to increased investment in the industry.

Indonesia’s largest steel maker Krakatau Steel is teaming up with the world’s third-largest steel producer, South Korea’s Posco, to build a $6 billion steel plant in Cilegon to produce 3 million tons of steel plate per annum by 2014.

Krakatau Steel also plans to spend an estimated Rp 5.92 trillion ($694 million) building a blast furnace in Cilegon next year, it will produce between 1.2 and 1.5 million tons of steel slabs starting early 2014.

PT IndoJapan Steel Center, a joint venture between Nippon Steel Trading Co., Ltd. and Krakatau Steel and two other local firms, is constructing a plant in Karawang, West Java. The plant is designed to produce 120,000 tons of sheet steel annually for automotive parts and is due to start operating in January 2013.

Recently, Chinese Wuhan Iron and Steel Corp. and its local partner, PT Gunung Garuda, announced a plan to establish plants in Medan and Kotabaru, South Kalimantan, with a total investment of up to $3 billion over five years to produce up to 1 million tons of steel per year.

Meanwhile Jogja Magasa Iron in cooperation with Australia’s Indo Mines is expected to set up a plant with a possible investment of $600 million to produce 500,000 tons of pig iron by 2014.

— JP/Linda Yulisman