Borneo Lumbung signs MoU with Krakatau Steel for coking coal supply
Wednesday, June 1 2011 - 05:27 AM WIB
Krakatau Steel said in January that the firm was still exploring the possibility to cooperate PT Borneo Lumbung to ensure a long-term coking coal supply for the steel company.
Under the Memorandum of Understanding, Borneo Lumbung may supply around 1 million tons for a new still mill that Krakatau Steel is developing jointly with South Korea?s steel firm Posco and another 500,000 tones to Krakatau?s own new steel mill, said Ken Allan, the Marketing Director of IDX-listed Borneo Lumbung.
?It (the volume) is not fixed yet because they have to build the steel mills first and trial them,? Allan told reporters on the sidelines of Coaltrans Asia conference.
?Until they build their blast furnaces, you don?t know how much hard coking coal, what reaction and how many coal you have to blend, ?he added.
Krakatau Steel and Posco signed a joint venture agreement in 2010 to invest up to $6 billion to build the new steel mill with production capacity of 5-6 million tons a year which will be built in two stages.
The steel plant which will occupy an area of about 3,800 sq meter near KS?s existing steel plant complex in Banten, West Java, will have a production capacity of 3 million tons in the first stage. The construction of the first-stage plant is scheduled for completion in 2013.
Borneo Lumbung also expects its production to increase by around 30 percent in to 4.6 million tons in 2012, from 3.5-3.6 million tons this year to meet demand from steel mills that are looking for diversifying their coking coal supply from Australia, the world?s top coking coal producer, said Allan.
?It?s not that much of coking coal around the world that coming new into the market. With the market growing 7-8 percent every year, you need new deposit found,? said Allan.
?We develop ours and put them in the market. We need to find buyers and everybody is looking for just diversification. For many years, people relied solely on Australia,? he added.
The firm sells its coking coal mostly on spot term although it has several long-term contracts with Chinese and Taiwanese steel mills, said Allan.(Fitri, Denny)