Posco sees Indonesia as a hot spot – by Joo Kyung-Don (Korea JoongAng Daily – September 18, 2014)


CILEGON, Indonesia — Sweat comes easily and often in Indonesia, where average daytime temperatures reach a humid 33 degrees Celsius (91 degrees Fahrenheit). And the hottest place in the country just might be Krakatau Posco, Southeast Asia’s first integrated steel mill.

“If you look at the history of steel industry, there is no mill on the Equator because it’s not easy to work in hot weather,” says Min Kyung-zoon, president of Krakatau Posco. “We are doing something that is outside the realm of common sense.”

The mill is a joint venture of Korea’s largest steelmaker, Posco, and Indonesia’s state-run steelmaker, Krakatau, in which the Korean company has a 70 percent stake.

It takes about 90 minutes, depending on Jakarta traffic, to drive to the industrial city of Cilegon on the northwest coast of the island of Java. Here, Posco is trying not only to make appositive change in the city, but in all of Indonesia.

For Posco, the success of Krakatau Posco – which has an annual capacity of 1.5 million tons each of slabs and steel plates – is important because it is the company’s first integrated steel mill overseas.

Considering that Posco was established 46 years ago in Pohang, North Gyeongsang, primarily by acquiring foreign technologies and know-how, it also signals the company’s evolving role in the global steel industry.

Taking the long view, Posco sees the Indonesia plant as the beginning of a Southeast Asia steel belt connecting China, Vietnam, India and Indonesia. Posco has cold rolling mills in Vietnam and India. However, the plants need hot rolled coil to make cold rolled steel.

“There is no tariff among ASEAN [Association of Southeast Asian Nations] members, but for other countries, the import tariff is huge,” said Min. “If we can provide them with material from Indonesia, we will be more competitive.”

Krakatau Posco was completed Dec. 23 after 30 months of construction that were not, by any measure, easy.

“Since it is a country that lacks steel, we even had steel bars that were stored near the construction site stolen in just a day,” says Park Heyong-keun, a construction manager at Krakatau Posco. “It also wasn’t easy to encourage locals to meet the work schedule in the hot weather.”

Even after construction, the company had to halt operation for a week because it found a small crack at the bottom of the furnace. Its first steel plate of 50 tons was rolled out on Jan. 22.

Today, 8,300 tons of melted iron are produced from the furnace of Krakatau Posco and 3,400 tons of steel plates rolled out daily.

Considering that Posco produces 38 million tons of melted iron annually at its mills in Pohang and Gwangyang, the production volume from Krakatau Posco is small, but significant in a country like Indonesia that imports 60 percent of its steel.

“All employees, whether they are Korean or Indonesian, are moving forward with one mind that they want to create a new success story here,” says Jeong Tae-soo who manages external affairs at Krakatau Posco. “Since it is the early phase of operation, we can’t relax. We have to only focus on work like what we are doing right now.”

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