PT Essar Indonesia, a local affiliate of India-based conglomerate Essar Group, will build a pellet factory at a cost of US$500 million on Kalimantan island to strengthen its presence in the country's steel industry, an official says.
"Essar is willing to build a pellet factory with a production capacity of about two million tons per annum," director general for the metal textile machine industry at the Industry Ministry, Anshari Bukhari, said Sunday as reported by Antara.
"With that commitment, Essar seems to be willing to expand its business to the upstream steel industry," he said during a workshop on industrial policies in Bogor.
Currently, Essar operates in the industry's downstream side, producing among other products, hot-rolled coil and cold-rolled coil.
In light of the country's deficit in producing raw materials for steel, the government had earlier asked state steel company PT Krakatau Steel to not build an iron ore processing factory in the province but rather a pellet factory.
"We're still hoping that Essar will be willing to cooperate with Krakatau Steel, so that they could form the biggest steel raw material supplier at home," Anshari said.
Anshari said Essar was not the only company interested in building a pellet factory in Kalimantan. Local steel producers such as PT Gunung Garuda, also had plans to make an investment.
"But the capacity would not be that big," he added, without elaborating.
Currently, Indonesia imports about US$6 billion worth of steel per annum to meet the increasing domestic demand, which stood at 6.5 million tons in 2005 and is expected to increase to 10 million tons in 2010.