Krakatau Steel, Japanese spare part maker agree to increase local content

Posted on 18 December 2017

Source: The Jakarta Post

Japanese automotive spare parts producer Sango Corporation has agreed to use products of state-owned steelmaker Krakatau Steel as part of Sango’s efforts to increase local content.

Under the agreement, Krakatau Steel will process raw materials imported by Sango to become wire rods that will be used by Sango to produce automotive spare parts in its factory in Karawang, West Java.

"Through the cooperation, Krakatau Steel will produce 40,000 tons of wire rods a year. Production will start early next year," Krakatau Steel president director Mas Wigrantoro Roes Setyadi told reporters in Jakarta on Monday.

The Indonesian automotive sector uses about 150,000 tons of wire rods a year, mostly imported.

Meanwhile, Industry Minister Airlangga Hartarto welcomed the agreement, saying it would increase local content in the automotive industry in the country. “The cooperation will set a milestone in Indonesia’s automotive industry,” the ministry added.

George Halasi, president director of TSIG Holding Pty Ltd, a Sango subsidiary, said his company had invested US$40 million, but the total investment was projected to reach $95 million.

However, Halasi said the investment projection relied on the ministerial regulation and the market prospect of automotive spare parts.

The local content of its products will initially be at about 30 percent and will be gradually increased to 60 percent, he added. 

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