POSCO Agrees with Krakatau Steel to Establish Integrated Plant in Indonesia

POSCO, South Korean largest steel maker announced on Wednesday the firm agreed with Krakatau Steel, Indonesian national steel company, to establish an integrated steel plant in Indonesia. The joint venture plans to construct an integrated steel works with 3 million tonnes of annual output capacity in first phase and expand the capacity to 6 million tonnes in second phase. The construction is scheduled to start in the second half of 2010 and complete in December 2013. This will be POSCO’s first integrated steel plant at overseas, which will develop raw materials in Indonesia and expand steel sales to India and Southeast Asia.

POSCO controls the JV with 70% equity while Krakatau Steel holds rest 30% shares. Krakatau Steel can increase its equity to 45% when steel plant operation enters stable phase. POSCO explained the JV will introduce a blast furnace in first phase and examines to adopt FINEX in second phase. The plant will be constructed near Krakatau Steel’s existing steel plant in northwest of Java island. The new plant can utilize existent infrastructure for water, electric power and port. This contributes to initial cost reduction and early operation start.

Mr. Joon-Yang Chung, POCO’s chairman said at a signing ceremony on Wednesday POSCO starts construction of its first offshore integrated steel plant in Indonesia where mineral resources and growth potential are abundant. He said POSCO will increase business investment in diverse fields including infrastructure and energy in cooperation with Krakatau Steel.

Indonesia’s potential reserves are estimated at 2.4 billion tonnes for iron ore and 20.9 billion tonnes for coal. Krakatau Steel was established in 1970. Current production capacity is 2.4 million tonnes per year. The firm holds 60% shares in Indonesian steel sheet market.

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