Krakatau Steel suspends $600m hot coil project<\/p>\n
JAKARTA (JP): State-owned PT Krakatau Steel has suspended the
\nconstruction of its US$600 million hot-rolled coil plant due to
\nthe country's worst economic crisis, a company executive said
\nhere yesterday.<\/p>\n
Krakatau Steel president Soetoro Mangoensoewargo said the
\nsuspension of the hot-rolled coil project had been approved by
\nthe minister of finance.<\/p>\n
Soetoro said the company considered the project to be no
\nlonger feasible following the sharp depreciation of the rupiah
\nagainst the U.S. dollar, and it finally pulled out of the joint
\nventure.<\/p>\n
The company announced last year the establishment of a joint
\nventure with South Korea's Pohang Iron and Steel Co. Ltd, PT
\nNusamba and PT Korindo to build the plant.<\/p>\n
Krakatau Steel, which owned a 40 percent stake in the joint
\nventure, was to contribute a 50-hectare plot worth $30 million
\nand $4 million in cash for the project, Soetoro said.<\/p>\n
Its Korean partner, Pohang, owned a 40 percent stake in the
\njoint venture while the other two local companies equally shared
\nthe remaining 20 percent.<\/p>\n
Soetoro said the crisis, which caused a fall in the rupiah's
\nvalue by 70 percent against the green back, had also forced the
\ncompany to delay and cancel some other expansion projects.<\/p>\n
These include a long-planned project worth US$130 million to
\ndouble the company's capacity of hot-rolled coil (HRC) to 500,000
\ntons and wire rod to 600,000, and to increase the capacity of
\ncold-rolled coil (CRC) to 900,000 tons from 500,000 tons, he
\nsaid.<\/p>\n
The project has been delayed due to financing difficulty, he
\nsaid.<\/p>\n
Referring to an earlier plan of Melbourne-based The Broken
\nHill Proprietary Company Ltd's (BHP) to buy shares in Krakatau,
\nSoetoro conceded that the plan had also been canceled due to the
\neconomic crisis.<\/p>\n
\"BHP had told us since the beginning of October that they
\ncould no longer go through with the plan anymore because their
\nstocks had collapsed.\"<\/p>\n
Exports<\/p>\n
Soetoro said Krakatau Steel's exports of steel products have
\nmore than doubled since the monetary turmoil hit the country's
\neconomy.<\/p>\n
He said the crisis, which had significantly reduced the demand
\nfor steel products, had forced the company to change its business
\nstrategy from focusing on the domestic market to exporting most
\nof its products.<\/p>\n
He said the company expected exports to make up about 70
\npercent to 75 percent of its total sales this year, up from 11
\npercent to 13 percent in the previous years.<\/p>\n
\"The domestic market is really sluggish currently because
\nalmost all sectors using steel, including infrastructure,
\nmanufacturing, and property, have stopped.\"<\/p>\n
The company sold 221,158 tons of HRC in the first quarter of
\nthis year, 68 percent or 151,221 tons of which were exported and
\nthe remaining 32 percent were sold domestically.<\/p>\n
Its sales of CRC in the same period reached 98,177 tons, 20
\npercent of which were exported.<\/p>\n
The company's exports of wire rod totaled 29,860 tons in the
\nJanuary to March period, or 48 percent of the total sales volume
\nof 62,803 tons.<\/p>\n
The total sales during the first three months of this year
\nreached Rp 750 billion (US$88.23 million), Soetoro said.<\/p>\n
Last year the company's exports of HRC accounted for 11
\npercent of the total 1.14 million tons, its CRC 12 percent of the
\ntotal 550,170 tons, and its wire rod 13 percent the total 311,023
\ntons, he said<\/p>\n
Its sales last year totaled Rp 2.4 trillion, while its
\noperating income increased to Rp 250 billion from Rp 81 billion
\nin the previous year.<\/p>\n
The demand for steel products in the domestic market has
\ndropped significantly this year due to a slowdown in property and
\nconstruction projects.<\/p>\n
Many property projects have been halted, and many large
\ninfrastructure projects have been canceled, while people's lower
\npurchasing power has reduced the consumption of automotive and
\nhome appliances, he said.<\/p>\n
Last year, domestic consumption of steel was estimated at
\nabout 4.7 million tons, made up of HRC 2.7 million tons, CRC 1.1
\nmillion tons, and wire rod 0.9 million tons.<\/p>\n
Soetoro did not say how much the demand had declined, but said
\nthat if it would take about two to three years for the national
\neconomy to recover again, steel consumption would take the same
\nlength of time to reach 1997's figures.<\/p>\n
The company's production last year was 2.038 million tons,
\nincluding the production of slab steel of 1.5 million tons and
\nthe production of billet steel.<\/p>\n
Its production of crude steel slid slightly by 3.8 percent to
\n81,309 tons last year. (das)<\/p>",
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