KS, Antam sign JV agreement to develop steel industry

State-owned steel maker PT Krakatau Steel (KS) and state-owned miner PT Aneka Tambang Tbk (Antam) have signed a joint venture (JV) agreement to develop a steel industrial complex in South Kalimantan.

The firms will soon set up PT Meratus Jaya Iron & Steel, which will initially build an iron ore smelter to produce direct reduced iron with a capacity of 315,000 tons. All of the production will be consumed by KS' steel mills in Cilegon, West Java, the firms said in joint statement on Tuesday.

The smelter construction is expected to start in November 2008 and begin operations in 2010.

The investment cost for the project is estimated at about US$60 million, which will likely be funded with 35 percent equity and 65 percent debt provided by Indonesian local banks.

KS will own 66 percent of the joint venture while Antam will hold the remaining balance.

The firms said in the long term the joint venture would build an integrated steel production facilities, expanding its operations downstream to steelmaking and rolling smelters, adding that the downstream facilities could have a capacity up to 1 million tons.

The total project cost is estimated at about $600 million, excluding the costs for infrastructure. Currently, KS is still conducting preliminary studies to expand the project, for which it may seek other strategic partners.

KS is expected to produce five million tons per year by 2011 to meet domestic steel demand. (denny)