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T Resteel Industry Indonesia, a joint venture between local steelmaker PT Trinusa Group and China'€™s major private steelmaker Shanxi Haixin Iron and Steel Group Co. Ltd., plans to build a US$500 million steel mill in Batam, Riau Islands, this year.

The construction of the mill, slated for completion within three years, might commence as soon as the end of this month, according to Resteel main commissioner Achmad Fadhillah.

'€œThe first line of the mill will be complete within six months, so by the end of this year we hopefully can kick off initial operations,'€ he said, adding that the initial line would produce 18,000 tons of low carbon steel each year.

He went on to say that the firm targeted to build three production lines by the end of next year, out of the total 10 lines planned.

The output of the first three production lines, totaling around 54,000 tons, would be exported to China to meet demand from its defense industry, such as to build submarines and tanks.

For the later phase, the firm said it would keep an eye on demand in the domestic market, such as from the gun industry, and overseas, including from the United States.

Achmad said Resteel would obtain iron ore pellet '€” the raw material used to make the specialty steel '€” from its processing facility in Tojo Una-Una, Central Sulawesi.

The facility is now under construction and is slated to have a capacity of 500,000 tons each year.

Based in Yuncheng, China, Shanxi Haixin Iron and Steel Group manufactures a wide array of iron and steel products, such as metallurgic coke, pig iron and crude steel.

Indonesia'€™s growing steel industry has recently attracted foreign steel producers, including China'€™s fourth-biggest iron and steelmaker Wuhan Iron and Steel Corp. and another key producer, Nanjing Iron & Steel Co., to set up production facilities in Indonesia, where raw materials are abundant.

The entry of the Chinese iron and steel industry may also illustrate the search for new raw material sources following stricter rules for facilities development due to environmental concerns.

In the past three years, Indonesia has seen robust investment in the steel sector.

The new investment from Resteel is expected to help the industry to grow by around 13 percent this year, after expanding by 10.7 percent last year.

The consumption of steel in Indonesia is still low compared to its Asian peers, such as Malaysia and Singapore.

Consumption of steel per capita in Southeast Asia'€™s largest economy is projected to reach 49.6 kilograms per year by 2015 when total annual steel demand is expected to hit 13.8 million tons.

The figure is expected to rise to 100 kilograms by 2025 when the national steel need is estimated to stand at 26.2 million tons per year, according to the Indonesian Iron and Steel Association (IISIA).

Industry Ministry directorate general for manufacturing-based industry said that the government was assessing new incentives, such as the elimination of import duties for machinery, to spur growth in the local steel industry, particularly through the use of cleaner and less energy-consuming technology.