KHI Pipe to export 25% of its production

JAKARTA (JP): Steel pipe producers PT KHI Pipe Industries, a subsidiary of the state-owned steel producer PT Krakatau Steel, will export at least 25 percent of its production capacity this year due to a sluggish demand in the domestic market.

The company's president, Sabungan Hutapea, said Tuesday that in past years the company only allocated 10 percent of its output for exports and focused its production on meeting domestic demand.

"We will boost our exports in order to comply with a government suggestion to boost foreign exchange earnings and also to anticipate the decline in domestic demand due to the postponement of many projects," he said following the launching of the company's first bulk of its US$1 million spiral pipe exports to Australia, India and Singapore.

Sabungan said the pipes would be used in irrigation systems in Australia, a high-pressure gas pipelines project in India and scaffolding in Singapore.

He said the company planned to increase its annual production capacity from 160,000 tons at present to 200,000 tons later this year.

KHI exported water pipes to Sudan in 1994, and scaffolding pipes to Japan and high pressure gas pipes to Pakistan in 1995.

He said the company was not able to export its pipe products in 1996 and 1997 due to its involvement in building a 550- kilometer gas pipeline linking Asamera in South Sumatra and Duri in Riau.

The company's pipes were used in a $74 million pipeline project owned by state gas company Perusahaan Gas Negara (PGN).

Sabungan said that KHI would participate in a tender for a 280-km pipeline project owned by PGN in Sumatra.

KHI's finance director, Anwar Ibrahim, said the company's export revenue was expected to increase in line with its increasing export volume.

"Our profit is expected to increase by 5 percent to 10 percent this year from Rp 6 billion last year," he said.

Sabungan said the company's profit increase was very realistic because the company has sufficient local raw materials and does not need to import.

He said KHI's raw materials have been supplied by PT Krakatau Steel at normal prices, which have not been affected by the monetary crisis.

In past years, the company supplied 70 percent of its products to local mining, oil and gas companies, 20 percent was allocated to supply local industrial sectors and irrigation systems, and the remaining 10 percent was exported. (gis/msa)