The Jakarta Post reported that Indonesian steel maker PT Krakatau Steel and Korea's POSCO will sign on July 23rd 2010 a JV to construct a steel production center in Cilegon in Banten.
Mr Mohamad S Hidayat industry minister of Indonesia told reporters that Krakatau and POSCO had agreed to all points in the agreement over months of negotiations. He added that "The signing of the agreement will be held at the industry ministry."
Gita Wirjawan head of the Investment Coordinating Board told The Jakarta Post in Daejeon earlier this week that POSCO had agreed to have a controlling 55% ownership of the project, with Krakatau would own the remaining share.
Previously, Mr Mustafa Abubakar state owned enterprises minister said that the ownership composition would not reflect spending on the plant’s construction. POSCO would pay 70% of construction costs.
He said that the costs would include the acquisition of up to 400 hectares of land in Cilegon. The two companies agreed to a price range of between USD 72 and USD 74 per square meter.
Gita said that the plant, which is expected to absorb up to USD 6 billion in investments, will have a production output of 5 million tonnes of 4 meter wide steel plates annually. The steel plates, generally used for ship building, will be sold to Vietnam, South Korea, China and Singapore.
Gita said that POSCO was among 5 companies whose executives he met in Seoul that were planning to either invest or expand their business in Indonesia. The combined investment commitment of the firms could reach up to USD 10 billion.
Gita said that Korea's second largest conglomerate group LG Corporation was considering making Indonesia the production base for its electronics products, thanks to the country’s improving investment climate.
Gita said that the POSCO deal was a major scalp for the agency’s one stop investment service policy launched in February 2010. He added that "It simplifies the decision making process to just under one roof, eliminating the need to go through a number of different ministries to set up a project."
POSCO's investment in the Cilegon plant will be part of the company’s planned USD 30 billion overseas investment in India, Vietnam and Indonesia.
Krakatau, the biggest steel maker in Indonesia, aims to increase its production from about 400,000 tonnes of steel products to 2.8 million tonnes in 2010 to meet rising domestic demand, which is expected to grow 12%.
Indonesia produced 4.5 million tonnes of steel in 2009. Currently, domestic steel producers only provide 70% of national demand. The government plans to sell a 30% stake in Krakatau through an initial public offering in the fourth quarter of this year, expecting to raise USD 600 million, which will be used to finance expansion plans. The company expects to book a 29% increase in total sales this year rising to IDR 21 trillion.
(Sourced from www.thejakartapost.com)
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