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Krakatau Steel scratches head over blast furnace

State-owned PT Krakatau Steel is devising a strategy for its stalled blast furnace project.

Divya Karyza (The Jakarta Post)
Jakarta
Thu, February 17, 2022 Published on Feb. 16, 2022 Published on 2022-02-16T13:53:52+07:00

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Krakatau Steel scratches head over blast furnace

S

tate-owned PT Krakatau Steel, the top metalmaker in the country, is devising a strategy to restart operating a multimillion dollar blast furnace whose operations were stopped in 2019 because of poor economics.

Krakatau Steel president director Silmy Karim, speaking on Monday, said the company was seeking US$100 million in investments to restart the project, which is worth $594 million. The funds would be used to install a basic oxygen furnace (BOF) to optimize operations.

“There are several [investors] who have shown interest in Krakatau Steel’s iron steel-making,” Silmy told House of Representatives Commission VII overseeing energy and mining at a working meeting in Jakarta.

Read also: Krakatau Steel officially launches second hot strip mill

The blast furnace complex, located in Cilegon, Banten, began commercial operations in July 2019 but stopped in December 2019. The facility has an annual production capacity of 1.2 million tons of hot metal, which will serve as an intermediary material to make a variety of finished steel products, including metal slabs.

But after starting up the furnace, the company discovered that the price of produced metal slabs was higher than market prices, posing a potential financial loss for the company if production continued, Silmy claimed.

Read also: Krakatau Steel sees 91% revenue rise in first half of 2021

Silmy told tempo.co in January 2020 that the company had built the furnace assuming it could get gas at $4 per British thermal unit (mmbtu), but it instead received gas at $8.5 to $9 per mmbtu. A 2016 presidential regulation that capped industrial gas prices at $6 per mmbtu did not help improve economics either.

The country needed at least five new blast furnace facilities with a production capacity of 1.2 million tons to suppress steel imports, Taufiek Bawazier, the Industry Ministry's metals, machinery, transport equipment and electronics industry (ILMATE) director general, said on Monday.

Read also: Jokowi aims to strengthen local iron and steel industry to curb imports

Also on the list of Krakatau Steel’s delayed projects is a $83.87 million steel plant under PT Meratus Jaya Iron & Steel in South Kalimantan. The facility began commercial operations in 2012 and was undertaken by Krakatau Steel in collaboration with state-owned metal miner PT Aneka Tambang (Antam).

The steel plant, which has a capacity to produce 315,000 tons of direct-reduced iron bars or sponge iron per year, stopped operations in mid-2015 because of geographical challenges and a downtrend in the steel market from 2014 to 2015.

“[PT Meratus Jaya Iron & Steel] is currently in the middle of a liquidation process,” Silmy said.

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