POSCO, Krakatau to expand Indonesia steel mill for $3.5 bn

South Korea’s POSCO Group and Indonesia’s state-run Krakatau Steel plan to jointly invest $3.5 billion in building a blast furnace and a cold-rolling mill in Indonesia, the two steelmakers said on Thursday.

POSCO is also seeking to participate in an estimated $35 billion construction project to move Indonesia’s new capital from Jakarta to the Borneo province of East Kalimantan.

On Thursday, POSCO signed a memorandum of understanding with Krakatau on the steel mill project in Seoul attended by Indonesian President Joko Widodo. He is on a two-day state visit to Korea that started Wednesday.

Under the MOU, both companies will build a second blast furnace and a cold rolled mill within the Krakatau steel mill complex by 2026.

They have been operating a steel mill in Indonesia since 2013, when they launched their joint venture there, Krakatau POSCO.

The JV's steel mill in Indonesia contains all production lines, from melting iron ore in a blast furnace to producing steel plates. Its blast furnace has a capacity of 3 million tons annually.

The second blast furnace will double the JV’s capacity to 6 million tons or more.
 
The Indonesian government will provide tax breaks and other incentives to POSCO while simplifying administrative processes to streamline the Korean steelmaker's investment in the country.   

POSCO Engineering & Construction Co. and its sister companies will likely participate in the construction projects.

ELECTRICITY INFRASTRUCTURE   

On the same day, Korea’s LS Group, whose businesses span electric cables, copper refining and heavy machinery, inked an MOU with Indonesia’s state-owned power utility Perusahaan Listrik Negara (PLN).

LS will provide electric cables and power equipment to PLN to build electricity and power infrastructure in the world's most populous Muslim-majority country.

In January, LG Cable & System Co. completed construction of its power cable plant in the Artha Industrial Complex near Jakarta. The plant will produce power transmission and distribution cables for buildings and plants.

Later in the day, President Widodo also held a roundtable meeting with senior executives of Korean business groups, most of which have already invested in Indonesia or expressed intentions to ramp up spending there.

The companies included Samsung Electronics Co., LG Group, CJ Group, LX Group, Lotte Chemical Corp., POSCO Holdings Co., GS E&C Co., KCC Glass Corp. and footwear manufacturer TKG Taekwang.

Write to Ik-Hwan Kim and Ji-Eun Jeong at lovepen@hankyung.com
Yeonhee Kim edited this article