Posco to build blast furnace, cold rolling mill in Indonesia

Posco will build additional blast furnace in Indonesia while embarking on anither project to build new waterworks.

The South Korean steelmaker signed an MOU with the Indonesian government and its state-run steelmaker Krakatau Steel on Thursday at Lotte Hotel in Seoul. The ceremony was attended by Indonesia President Joko Widodo, Karakatau Steel CEO Silmy Karim, and Posco Vice Chairman Kim Hak-dong.

Posco and Krakatau Steel have agreed to spend 3.5 billion U.S. dollars (about 4.5 trillion won) on the project over the next five years to add a blast furnace of a 3-million tons of annual capacity and cold rolling mill.

Posco’s decision to expand the production capacity in Indonesia reflects the surging demand in the country as emerging production hub of electric vehicles for global automakers.

The two companies will make the investment through joint company Krakatau Posco. In addition to the blast furnace and cold rolling mill, Krakatau Steel will make a hot rolling mill in Indonesia through investment-in-kind from Krakatau Posco. Located in Cilegon, 100 kilometers northwest from Jakarta, Krakatau Posco has been operating a 3-million-ton blast furnace and a steel plate factory. The latest investments will allow the two partners to double their annual steel production and secure the facilities for steel plate for car manufacturing.

Based on its experiences in the development of Songdo International City, Posco will participate in the project to build waterworks in Indonesia. The Indonesian government vowed to administrative support to permit the steel and construction projects along with financial incentives including tax breaks.

“For the first time in our history, Posco will build a second blast furnace in an integrated steel mill in a foreign country under the aegis of the Indonesian government and Krakatau Steel,” said the Posco vice chairman.


Chang-deok Kim drake007@donga.com