KRAKATAU STEEL PLANS TO BUILD NEW FACTORY

TEMPO Interactive, Monday, 08 May, 2006

Jakarta: Investors from India and China are interested in joining PT Krakatau Steel in a steel factory construction project in South Kalimantan worth between US$600 million and US$1 billion.

Both investors are interested in building roads, steam powered electricity power plants, and harbors.

Director General of Metals, Machineries, and Multifarious Industry, Anshari Bukhari, said Krakatau Steel can only afford fifteen percent of the project's cost.

That is why this state company needs investors.

“However, Krakatau Steel has the right to choose the investors it prefers,” said Anshari in Jakarta last weekend.

Krakatau Steel has two options for expansion to South Kalimantan, either to build only the factory, or to build an integrated factory.

For building a steel processing factory, the funds required are US$119 million, but Krakatau Steel can only prepare some US$30 million.

Building an integrated factory will require between US$600 million and US$1 billion.

This includes not only building a factory, but also for funding the construction of supporting infrastructure.

Due to the large funding requirements, Krakatau Steel will build the factory first.

“The proper study of this factory building will be complete in June,” said Anshari.

Construction of the factory can start next year and is scheduled to be completed in 2008.

The new factory is necessary because the state's steel demand currently reaches between four million and five million tons per year.

However, national production is only between two million and 2.5 million tons, and the remainder must be imported.

The demand for steel will keep increasing and it is predicted that by 2008, it will reach six million tons.

PT Krakatau Steels's President Commissioner, Amir Sambodo, confirmed that investors from India and China were interested in working together to develop an integrated steel factory in South Kalimantan.

He said that the two investors' interest was a positive signal in terms of the plan to build an integrated steel factory.

Krakatau Steel is preparing the technical plans, including the plan to build infrastructure including roads, bridges and a harbor.

Some time ago, Krakatau Steel's President Director, Daenulhay said this expansion project to South Kalimantan is part of the business plan to increase steel production up to 20 million tons per year.

This target will be carried out in phases, starting in 2008 by producing a million tons per year, 10 million tons by 2013 and 20 million tons in 2020.

The funding required to meet this target is US$2 billion.