W

uhan Iron and Steel Corporation, China'€™s fourth-largest iron and steel maker, plans to invest up to US$5 billion this year to build an integrated mill in Indonesia.

The firm has carried out a feasibility study for the project and is now assessing the location to set up the mill, says Industry Minister MS Hidayat.

'€œThey are seeking a location that is close to a seaport with a specific depth, sufficient electricity supply and supporting infrastructure,'€ he said on Wednesday after a meeting with the firm'€™s executives at his office.

The development of the integrated iron and steel mill by Wuhan will run along with the establishment of a 1,500-hectare industrial park, according to Hidayat.

He said he recommended East Java as a potential site for the mill due to its availability of necessary infrastructure and relatively easy access to raw material in Kalimantan, north of East Java.

Wuhan at present produces and distributes a wide range of iron and steel products, including hot-rolled plates, medium and heavy plates, heavy sections, high speed wires, steel rods, steel billets, as well as cold-rolled products.

It ships most of its products to mainland China.

In 2011, Wuhan had planned to set up steel mills in Medan, North Sumatra, and in Kotabaru, South Kalimantan, in collaboration with domestic steelmaker PT Gunung Garuda, with a total investment of up to $3 billion over five years.

The mills were designed to annually produce up to 1 million tons of steel.

However, the plan collapsed for unknown reasons.

Wuhan would likely team up this time with Indonesian conglomerate Sinar Mas Group to build the steel mill, said Hidayat.

The local business group focuses primarily on agriculture, pulp and paper, property and finance.

Hidayat said it would take '€œa few years'€ to gradually construct the mill, which would produce up to 5 million tons of iron and steel products for various applications, including for the automotive and shipbuilding industries.

'€œThe products will primarily be sold in the domestic market, thereby allowing us to reduce imports,'€ he added.

Demand for iron and steel has increased markedly in recent years thanks to robust development in the infrastructure and automotive industries.

Indonesia'€™s steel consumption may rise by 8 percent on an annual basis to 20 million tons by 2020, offering enormous opportunities for new investment in the sector, according to the Indonesian Iron and Steel Association (IISIA).

Last month, local producer PT Gunung Gahapi Sakti, a subsidiary of PT Gunung Garuda, announced its plan with its partner, China'€™s Nanjing Iron&Steel Co., to construct a $200 million steel mill in the second quarter of this year.

This mill, to be located in Medan, North Sumatra, would be developed in two phases, with the initial phase to begin in April at a cost of $100 million, Djamaluddin Tanoto, president director of PT Gunung Garuda, the holding company of Gunung Gahapi, earlier said.

The mill is scheduled to start commercial operations in August next year and will produce 500,000 tons of concrete-reinforcing steel and wire rod in its initial phase.

The second phase might begin afterward and would double the mill'€™s output by 2017.