News Room - Steel Industry

Posted on 27 Nov 2023

Indonesia's Krakatau targets longs, flats expansions through jvs

Indonesian state-owned steel producer PT Krakatau Steel (PTKS) plans to finalise details to reactivate operations at its mothballed blast furnace complex in the next few months. The Cilegon-based steelmaker aims to finalise its agreement with Chinese partner Baowu's subsidiary, Zhongnan Steel, by end-year or during the first quarter of 2024, president director Purwono Widodo tells Kallanish.

PTKS has entered into an MoU with Baowu subsidiary, Zhongnan Steel, which will see the installation of a basic oxygen furnace in the complex which will support 2m t/y capacity for billet and wire rod in the first stage and for expansion to 4-5m t/y in a final stage. Zhongnan will provide the financing for the project while PTKS will provide the land and equipment on the current plant site, which includes a coke oven, sintering plant and the 1.2m t/y blast furnace plant. The joint venture involves $1.2 billion investment with the Chinese partner likely taking a majority shareholding.

"Discussions with Baowu started in 2022 and we have made aggressive progress," Purwono says. "The draft of the Joint Venture Agreement (JVA) has been drawn up," he says. Issues concerning legal matters relating to the previous operator of the blast furnace and the project lenders are in the final stages of being ironed out, Purwono says. PTKS is also on track with its restructuring to reduce its debt burden and this has included the divestment of some of its subsidiaries and assets.

Once the JVA is released, construction of the BoF and other equipment including a wire rod mill, will start and this is expected to take two years. The high cost of the blast furnace plant forced the closure of the existing complex after six months of operation in 2019.

PTKS is also gearing itself to supply Indonesia's emerging electric vehicles sector together with joint venture partner, Posco, Purwono disclosed. The two companies currently operate PT Krakatau Posco (PTKP), an integrated mill which produces plate and hot rolled coil. Posco and PTKS each hold 50% shareholdings in PTKP.

In the current first stage, PTKP produces 1.5m t/y of plate and 1.5m t/y of hot rolled coil. Capacity in this phase can be ramped up to 4m t/y according to market demand, and to finally produce 10m t/y of flat steel products. PTKP had previously announced that it plans to install another 3m t/y steelmaking facility, a second hot strip mill and a cold rolling mill, each with 3m t/y capacity, and a 500,000 t/y cold-galvanizing production line. All of these are to be completed by 2026.

Indonesia will need much more steel as it becomes a developed country. Steel demand is forecast to reach 100m tonnes annually by 2045. "There will be room for steel clusters of 15-20m t/y each in Cilegon and Morowali,"Purwono says. 

Meanwhile, PTKS suffered a blow earlier this year when its Hot Strip Mill 1 of 2.4m t/y capacity caught fire in May. "Repairs are currently being carried out by a vendor selected by tender process," a company source says. The strip mill is scheduled to restart trial operations by the third quarter of 2024.