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RI, S. Korea step on gas to settle dispute in steel project
Indonesian and South Korean stakeholders are committed to making progress in the tight negotiations behind the realization of the country’s dream to establish 10 million ton steel production capacity
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ndonesian and South Korean stakeholders are committed to making progress in the tight negotiations behind the realization of the country’s dream to establish 10 million ton steel production capacity.
Out of the target — set to be achieved by 2025 on a cluster of Cilegon industrial estate in Banten — only 4.5 million tons has been installed by state firm PT Krakatau Steel and its subsidiary, Krakatau Posco, a joint venture with South Korean giant Posco.
The next steps include the construction of a second hot-stripped mill (HSM), which has reached 17 percent completion, and a cold-rolled mill (CRM) that has been delayed due to ongoing negotiations with several potential partners over the ownership structure of the CRM.
Krakatau Steel president director Mas Wigrantoro Roes Setyadi said the HSM would be operated by Krakatau Posco. Meanwhile, the CRM would possibly be run by a new joint venture controlled by Krakatau Steel, Posco and Japan-based Nippon Steel.
“It involves deep understanding, not only business-to-business negotiations but also among countries: Japan, Indonesia and South Korea. We need a win-win approach,” he told reporters at the sideline of the 2017 Indonesia Steel Conference at the Industry Ministry building on Tuesday.
Wigrantoro said the firm was negotiating with Posco to change the ownership structure of Krakatau Posco, in which Krakatau Steel owns 30 percent shares, while Posco owns 70 percent. The decision is expected to be made in October.
The state firm is also negotiating with both Posco and Nippon Steel to seek possible partnership to build and operate the CRM. “There’s only one single problem: creating synergy among the three [parties],” Industry Minister Airlangga Hartarto said.
“The [10 million ton steel cluster] project is owned by Posco and also Krakatau Steel. We hope Posco can realize this vision and maintain cooperation with Nippon at the same time. So, this kind of synergy is important. If both Posco and Nippon join the project, there will be no problem with technology and financing,” he told the conference.
Posco CEO Ohjoon Kwon expressed the firm’s commitment to accelerating the mega project through better negotiations, while urging the government to push local industry in using local steel to help domestic steelmakers compete with imported steel.
“We’ll progress faster through better coordination. That’s the critical part. Also, I think the government needs to find ways to reduce imports so we can increase the competitiveness of Indonesian-made steel,” he said.
Steel imports to Indonesia rose significantly in the past years. Various steel product imports, namely hot-rolled coil and plates (HRC/P); cold-rolled coil and sheets (CRC/S) and wire rod, increased by 35 percent; 54 percent; and 24 percent in average in 2012 to 2016 period, Krakatau Steel data shows.
HRC/P; CRC/S; and wire rod imports reached 325,523 tons; 257,081 tons; 720,387 tons respectively last year. In total, steel import in 2016 stood around 6 million tons out of the 14 million tons national demand.
“Should this lag continue with no increase in domestic production capacity, the raw steel supply deficit could reach up to 8.9 million tons by 2020 and increase further to 15.9 million tons by 2025,” said Minister Airlangga.
Should the second hot stripped mill run on schedule in 2019, the project will see another 1.5 million tons added to its current 4.5 million ton capacity. The remaining 4 million tons will need about US$4 billion investment.
