Commencement of Operation at New Blast Furnace Depends on Business Climate - Krakatau Steel

PT Krakatau Steel - Indonesia's state-owned steel maker, said while its new blast furnace is 'technically ready' for operation at the end of this year but it will depend on several business calculation.

Indonesia's biggest steel maker has been developing a new blast furnace complex, which consists of of blast furnace, sintering plant, coke oven plant, pig iron caster, stockyard and material/hot Metal Handling to produce 1.2 million tonnes per year of hot metal and pig iron, the company said in its first quarter 2018 report.

"It will depend on met coke prices, the market situation. It's more of a 'fine-tuning,'" said Marketing Director Purwono Widodo told SteelMint in an interview on sidelines of SEAISI 2018 conference.

"We're looking at the timing whether the business cycle is in a good condition or not. Because, once we turn on the blast furnace, it can't be stopped for 15 years," Widodo added.

PT Krakatau Steel estimates construction of of the blast furnace plant in financial terms reached 86% by end of March 2018 and was expected to be completed by first semester of 2018, it said in its first quarter 2018.

When asked if the current surging met coke prices was one of the considerations to start operating, Widodo said 'yes.'

Apart from the blast furnace project, Widodo said, PT Krakatau Nippon Steel Sumikin, a joint venture between the company and Nippon Steel & Sumitomo Metal Corporation, will start official operation in August.

"The (Krakatau Nippon Steel Sumikin) plant has been soft-launched. The plant has been running but it's yet to start official production," said Widodo. The products can be used for automotive industry or "switching the products for construction, if the automotive market wasn't good," he said.

PT Krakatau Nippon Steel Sumikin plans to produce galvanized and annealed steel products with production capacity of 500,0000 tons per year.

In September 2014, PT Krakatau Steel reduced its share ownership to 20%, from 49% at the start of the project. PT KNSS plans to produce galvanized and annealed steel product with production capacity of 500,000 tons/year (unaudited). Nippon Steel holds the remaining. It established PT KNSS in Cilegon, Indonesia, with the percentage of ownership of 49% for the company and 51% for NSSMC. Based on shareholders resolution dated September 5, 2014, the Company's ownership interest in PT KNSS became 20% and 80% for NSSMC.