POSCO Puts Huge Plan in Motion

Giant takes first step in its grand plan to build steel production belt in Indonesia

POSCO kicked off ground-leveling work at a ceremony for its joint venture steel mill in Chilegon, Indonesia, some 100 km from Jakarta, which will be the first integrated steel plant in Southeast Asia, costing $2.7 billion for the first stage of the mammoth project, POSCO said on Oct. 28.
When completed in 2013 the steel mill, built in a joint venture with Krakatau Steel Co. of Indonesia, will turn out 3 million tons of crude steel and will be the largest foreign investment project in the Southeast Asian country. It is expected to help other Korean firms to follow POSCO in setting up operations in Indonesia. POSCO and Krakatau Steel signed a joint venture agreement in which POSCO will hold a 70-percent stake and the Indonesian steel company will own the remaining 30 percent with a provision that the local partner can expand its holding to as much as 45 percent when the new steel mill’s operation is stabilized.
Included among the dignitaries attending the ceremony were Speaker Mazurki Ali of the Indonesian parliament and a number of local government ministers, POSCO Chairman Chung Joon-yang, President Fazwar Bujang of Krakatau Steel and Korean Ambassador Kim Ho-young.
POSCO Chairman Chung said in his speech at the ceremony that the projected steel mill is the first integrated steel plant to be built by POSCO outside of Korea and he is determined to make the new steel plant a huge success, taking POSCO’s operation ideals as models.
The plant site is some 400 ha in area and the ground work is slated to be finished by June 2011 and the projected first stage of the steel mill is scheduled for completion in 2013 with a production capacity of 3 million tons of crude steel. If the outlook is good for expansion, the second stage of the project will be undertaken to increase total steel output to 6 million tons annually with the additional investment of $2.9 billion.
Since the first stage of the project is a brownfield type project, it doesn’t require the construction of infrastructure facilities such as loading wharfs, water, power and others as the new steel plant is being built not far from the Krakatau steel plant.
POSCO’s plan to build a steel mill in Indonesia is aimed at constructing a steel production network linking Vietnam, Thailand, Indonesia, China and India. With this in mind, POSCO took over the Asia Stainless Steel Co. in Vietnam and plans to soon go after Thainox, a steel company in Thailand.
POSCO is also considering a plan to either buy stakes in or take over management of a Chinese steel company. It is already taking steps to build a 12-million ton steel plant in Orissa State in India and is in talks with the largest steel firm in India to set up a joint venture integrated steel mill with an annual capacity of 3 million tons of steel. POSCO plans to set up other businesses in Indonesia, with the steel mill as a base, such as energy and information & communication infrastructure.
Chairman Chung said POSCO has secured an important steel market share in fast-growing Indonesia before China and Japan. “We will do our best to make the venture a huge success with the same determination we had when building POSCO steel plants some 40 years ago. We were determined to drown ourselves in Youngil Bay if POSCO failed,” he recalled.
Chung said by 2018 POSCO plans to expand its steel output at home and abroad, centered around its steel plants in Southeast Asia, to 60 million tons annually as the company continues to build a steel production belt in Asia. He said POSCO’s steel plant projects in Vietnam and India are being delayed a little, but they will be realized as planned. Chung said POSCO also plans to expand its strategy to bring its steel product sales to 100 trillion won by extending the target year to 2020 from 2018 now that it has taken over Daewoo International.
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A slew of dignitaries from Indonesia and Korea including Chairman Chung Joon-yang of POSCO shovel earth at a ground-breaking ceremony for POSCO’s joint venture steel mill in Chilegon, Indonesia, on Oct. 26 at the cost of $2.7 billion.