0 India-based Essar to invest US$125 million to boost output

India-based diversified firm, Essar Group, will boost its steel production capacity in Indonesia this year, aiming to tap into the surging domestic demand for steel. KB Trivedi, the president director and chief executive officer (CEO) of PT Essar Indonesia, a local business unit of the group, conveyed the expansion plan during a meeting with Industry Minister MS Hidayat in Jakarta on Wednesday. To support its expansion activity, Essar would make an investment amounting to US$125 million, Hidayat said after the meeting. 

“The firm will likely realize its plan in the second quarter of this year,” he told reporters. At present, Essar operates a cold rolled coil (CRC) plant in Cibitung, Bekasi, West Java, with a production capacity of 400,000 tons per year, which makes it the second-largest producer of CRC in Indonesia after state-owned steel maker Krakatau Steel. The annual output of Essar’s plant in Cibitung, Bekasi, West Java, includes 150,000 tons of galvanized strips, used in automotive and construction, and 100,000 tons of cold rolled soft steel, used to make pipes and tubes, enamelware and furniture. 

In addition to the steel business, Essar Group also has a presence in the energy sector in Indonesia, holding exploration rights in the Southeast Tungkal oil block in the central Sumatra basin. The Industry Ministry’s director general for manufacturing-based industry Panggah Susanto detailed the plan, saying that Essar would upgrade its annual production capacity of CRC to 700,000 tons. “Our demand for CRC increases each year and this is what the firm expects to meet,” Panggah told reporters after the meeting. Total CRC consumption in Indonesia is estimated to reach 2.4 million tons per year, according to Industry Ministry estimates. 

However, overall output is only 1.63 million tons, generated by four firms: state-owned Krakatau Steel (850,000 tons), Essar Indonesia (400,000 tons), Little Giant Steel Corp. (230,000 tons) and Raja Besi (150,000 tons), leaving the remainder sourced from imports, such as from China, Japan, South Korea, Taiwan and Vietnam. Local industry groups have estimated that domestic steel consumption will continue to rise, driven by robust development in the infrastructure, construction and automotive sectors in Indonesia, Southeast Asia’s largest economy. 

Domestic steel consumption will grow by between 6 percent and 9 percent this year from the 10.4 million tons estimated last year, according to the Indonesian Iron and Steel Industry Association (IISIA). Of the overall demand for steel every year, between 35 percent and 40 percent is imported as local capacity cannot cater to domestic demand. Due to the shortfall in domestic supply, local firms are working on expanding their production capacity. Krakatau Steel, for instance, is building in conjunction with the world’s third-largest steel maker, South Korean steel giant Pohang Iron and Steel Company (Posco), a steel plant in Cilegon, Banten, in an investment worth $6 billion. The plant, scheduled to begin operations at the end of this year, will have an annual capacity of 3 million tons per year, comprising various steel products such as steel plates, steel slabs and hot rolled coil.

source : the jakarta post