Korean steel producer Pohan Steel and Iron Corporation (Posco) signed a joint venture agreement in August this year to build and operate a $6 billion steel plant in Cilegon, Banten, with Indonesia’s largest steel maker PT Krakatau Steel. PT Krakatau Steel is a state-owned steel producer having 60% market share of steel plate market. The new integrated mill with an annual capacity potential of 6 million tons will be constructed in two phases, with the first phase of 3 million tons expected to start in the second half of 2010 and target to run with full capacity by 2014.
As per the agreement, POSCO will have an initial share of 70% in the new company while Krakatau Steel has the option of increasing its stake up to 45% in the second phase of expansion. Presently Pohan Steel and Iron Corporation (POSCO) is the world’s third largest steelmaker and supply mainly to the shipbuilding and construction industries. The company has been growing internationally in many countries - Australia (70% share in Sutton Forest coal mine and 24.5% in API Iron Ore mine), China (contract with Jilin Province and manufacturing of processing centers), India (Orissa project and joint venture with SAIL), Brazil (20% stake in Brazilian steelworks project together with Tongue Steel Mill and Vale S.A) and Indonesia (Krakatau steel project).
After US$ 6 billion investment commitments from South Korean steel maker POSCO in August, Indonesia now expects more investments to follow from large companies of that country. Interestingly, South Korea is the sixth biggest foreign country investing in Indonesia.