Krakatau Posco discusses $450m automotive steel plant

Steel firm PT Krakatau Posco (KP), a joint venture between state-owned steel maker PT Krakatau Steel (KS) and South Korean giant Posco, are in talks to develop a new plant worth US$450 million, The Jakarta Post reported on Friday.

Posco Indonesia Inti (PII), Posco?s holding company in Indonesia, said the plant would mostly cater to significant rising demand from the domestic automobile industry.

The Post quoted PII?s marketing managing director Kenneth KJ Rhee as saying his firm was in talks with KS about the feasibility of building a cold-rolling mill, which will mainly produce automotive steel, early next year.

?We are still in discussion with Krakatau Steel about how we can invest in this cold-rolling plant for high quality steel,? he said on Tuesday after the Seventh Asia Steel Forum.

Rhee further revealed that the construction of the facility would run in two phases, with the first phase set to require $250 million of the overall $450 million investment.

It would have an annual production capacity of between 1.2 and 1.5 million tons of cold-rolled steel, he added.

Posco, the world?s biggest steel maker, now holds a 70 percent stake in KP, while the remaining 30 percent is owned by KS, South-east Asia?s top steel producer.

The joint venture has invested $3.58 billion to build integrated steel facilities in Cilegon, Banten, that produce steel slab and plate, among other products. Thai is in line with the government?s target to create a steel cluster that can produce 10 million tons of steel each year.

Krakatau Steel president director Mas Wigrantoro Roes Setyadi confirmed the plan, saying that his firm was discussing it with Posco and separately with another KS partner, Nippon Steel.

Japan?s Nippon Steel, along with another partner, Sumitomo Metal Coporation, has set up a joint venture with KS and built a $378 million steel plant to produce galvanized steel, mostly used by the automotive industry. Previously, Posco was once in conflict with KS following the latter?s joint venture with the two Japanese firms.

?If the conditions are agreed, the three of us (KS), Posco, Nippon Steel may build the plant together,? Wigrantoro told The Jakarta Post. ?If one of us can?t agree, we can go with the other. Otherwise, we [KS] will go ahead alone.?

The automotive sector accounts for around 8 percent of national steel consumption, according to data from the Industry Ministry.(*)