Krakatau Steel to raise output to 7.5 million tons

JAKARTA (JP): State-owned steel manufacturer PT Krakatau Steel plans to increase its annual production to 7.5 million tons by 2001 from 2.6 million tons at present, a company executive said yesterday.

Krakatau Steel President Soetoro Mangoensoewargo said the expansion program would be financed by the company's planned Initial Public Offering (IPO) and bank loans.

He said that to improve the efficiency of its Direct Reduction Plant, the company needed about US$1 billion in new investments.

He did not say how much money was needed to develop the company's other facilities.

The plant produces sponge iron. It can make 2.35 million tons a year.

Krakatau Steel will produce 2.6 million tons of steel this year, up from 2.3 million tons in 1995. Crude steel demand this year is estimated at 8 million tons, up from 6.7 million tons in 1995.

Soetoro said the company planned to increase its steel production capacity to 5.5 million tons in 1999 and 7.5 million tons in 2001.

Crude steel demand is expected to reach 9.7 million tons and 11.6 million tons respectively during those two years.

Soetoro said Krakatau would sell some of the company's shares to the public in October or November this year. But he refused to give details.

He said the company was confident about entering the stock market because steel prices were better.

"After watching steel prices, we feel it is appropriate to go public now," he said.

He said steel prices had improved since the government imposed temporary countervailing duties on imports of hot rolled coil in April.

He said prices had gone up by about $10 a ton on the local market thanks to the anti-dumping duties. Prices increased to $360 a ton from $350 before the duties were imposed, Soetoro said.

Indonesia's Anti-Dumping Committee imposed duties, ranging between 22 percent and 42 percent, on imports of hot rolled coil or plates from China, India, Russia and Ukraine.

The duties came into effect when Ministerial Decree No. 176, 1997, was signed on April 17, by the Minister of Finance.

Under the decree hot rolled coil or plates from China are subject to a 30 percent anti-dumping tariff; from India, a 26 percent to 38 percent tariff; from Russia, a 39 percent tariff; and from Ukraine, 22 percent to 42 percent.

MOU

Soetoro yesterday witnessed the signing of a memorandum of understanding (MOU) between PT Krakatau Bandar Samudera, a subsidiary of Krakatau Steel, and Gerico France of France.

Under the MOU, Krakatau Bandar received a 1.6 million French franc (US$278,200) grant to expand its Cigading port in West Java.

Krakatau Bandar's president B. Sudarto said the grant would be used for a pre-investment study of the proposed expansion of the port's capacity to 12 million tons a year, and a berth occupancy ratio of 60 percent.

Now, the port can accommodate only 5 million tons of cargo a year and has a 55 percent berth occupancy ratio.

Sudarto yesterday signed a MOU with Gerico France of France which will conduct the pre-investment study. Gerico France was represented by Jean-Paul Laurent from the company's Jakarta office.

Sudarto said the study would also assess the handling facilities of a new port near Krakatau Steel's steam-generated power plant. (pwn)