POSCO On a Roll

Steelmaker agrees to build joint venture integrated steel mill in Indonesia to sweep Southeast Asian market

POSCO is ready to begin construction of its integrated steel mill in Indonesia with everything cleared for the project, POSCO said recently.
Chairman Chung Joon-yang signed an agreement with Krakatau Steel Co. of Indonesia to set up a joint venture to build and run the projected steel plant capable of producing 6 million tons of crude steel annually on Aug. 4. The Korean steel giant will hold a 70 percent stake and the Indonesian partner 30 percent of the new steel mill, which is scheduled to go on stream in December 2013, POSCO said.
Chairman Chung said he is so glad to see POSCO building its first overseas integrated steel mill in Indonesia, a country with abundant natural resources and great growth potential. He also said POSCO will cooperate with Krakatau Steel in a number of other areas including the infrastructure construction and energy exploration businesses. Following the signing of the agreement, the POSCO CEO called on Indonesian President Susilo Yudhoyono and discussed POSCO’s future investment projects in the Southeast Asian country.
The Indonesian partner can increase its stake to as much as 45 percent when the steel mill operation hits a normal stage, the steelmaker said. POSCO agreed on the provision as the site of the projected steel mill is right next to the Krakatau Steel plant and therefore can get all kinds of miscellaneous help from the steel mill during the construction period.
The projected steel plant will be built in Chilegon City, a port town on the northwest of Java Island, and will be constructed in two stages. The first stage of the project will be kicked off in October and completed in 2013 and will be able to turn out 3 million tons of steel annually.
The exact investment figures have not been announced, but it generally was estimated to require $6 billion in total investment based on the projection that it would require $1 billion to build a steel plant to produce 1 million tons of steel annually.
Earlier, POSCO considered building a FINEX blast furnace at the projected steel mill, but decided against the idea since it is not capable of producing 3 million tons of steel and time was too short to install it at the new mill. POSCO developed the FINEX blast furnace technology and it is being used at its steel plant complex in Pohang.
The Indonesian steel project has a number of advantages such as port facilities, water and electricity and others that are available from the Krakatau Steel plant located near the site of the new steel mill. The project is classified as a Brownfield investment type, POSCO officials said.
They said the new project is likely to be a great success as both partners have extensive experience running steel mills, thus creating a huge synergy from the new venture. POSCO, for one, is expected to gain a dominant position in the steel industry in Southeast Asia through the new steel plant and Krakatau will be able to take advantage of supplying steel products to meet the rising demand for steel in Southeast Asia, in addition to securing a 60 percent market share in Indonesia.
The new steel plant will have easy access to iron ores in Indonesia estimated at 2.4 billion tons along with 20.9 billion tons of coal reserves. POSCO, under its strategy to expand its investments in the area of natural resources exploration, plans to explore extensively in Indonesia, which will also help boost the competitiveness of the new steel plant.
In the meantime, POSCO ICT on July 30 signed a memorandum of understanding with Xtreme Power, a U.S. solutions firm, and SkyLane Incuvest, a local private equity fund, to cooperate in smart grid development.
Based in Texas, Xtreme Power develops and manufactures integrated power management and storage systems in the electricity industry, especially for renewable energy companies such as wind and solar power where electricity stabilizers are a must due to the irregularity in supply. The company has recently developed new modular and scalable power storage technologies that enables makers to store electricity in integrated panels of up to 100 megawatts without power leakage.
POSCO ICT, which invested $4 million with SkyLake Incuvest in Xtreme Power prior to the project, plans to jointly embark on a new large-capacity power storage system business in the Asian market. This is also the key technology in the smart grid industry. It joined the smart grid project on Jeju Island last year in its pursuit of securing its own storage system solutions. Now it expects this new project to create further synergetic effects in the business. nw

Chairman Chung Joon-yang of POSCO, right, shakes hands with his counterpart of Krakatau Steel of Indonesia after signing an agreement to build a steel plant capable of producing 6 million tons of steel per year in joint venture with the Indonesian steel maker on Aug. 4 in Jakarta.