Posted on 30 Oct 2014
Chinese
firms Fuhai Group and Ansteel Group will invest up to US$1.2 billion in the
development of an industrial estate and its infrastructure facilities in Ujung
Jabung, Jambi, Sumatra.
Fuhai chairman Lizhi Zhao said in Jakarta on Wednesday that his company had
recently signed an agreement to develop an industrial zone that would be used
to develop a steel smelting plant.
He said he and the companies’ representatives would visit Ujung Jabung on
Wednesday to observe the planned location of the industrial estate.
The first stage of the development, which will cost about $1.2 billion, will
consist of a steel plant, a power plant, a port and a number of supporting
facilities, such as the main office, according to Lizhi. An area as large as
500 hectares will be needed for the first stage.
“Construction will take around one-and-a-half to two years. We expect that we
will already be in production by the end of 2016,” Lizhi said, adding that the
company was still conducting a feasibility study for the later development
stages.
For the development project, Fuhai and Ansteel are also cooperating with a
company owned by the local administration.
Under the plan, the steel plant will have an output capacity of 1.75 million
tons a year. Most of the product will be sold in the domestic market.
“At this moment, the Indonesian market is already able to consume our product.
The demand is growing and the country is now importing it,” Lizhi said.
Indonesia has seen robust investment in the last few years because of the
growing demand. This year, consumption is estimated to stand at 14.7 million
tons, an increase of 8 percent from last year, according to the Indonesian Iron
and Steel Industry Association (IISIA).
As
much as 65 percent of the demand will be met by a domestic supply, while the
remaining 35 percent will be filled by imported product.
Despite the growing demand, Indonesian steel consumption remains low compared
to that of its Asian peers, such as Malaysia and Singapore. Consumption of
steel per capita in Southeast Asia’s largest economy is projected to reach 49.6
kilograms per year by 2015. By 2025, the figure is expected to rise to 100
kilograms when the national steel need is expected to reach 26.2 million tons
per year, according to IISIA.
The director general for mineral and coal at the Energy and Mineral Resources
Ministry, R. Sukhyar, said Fuhai and Ansteel’s development plans would help the
country develop a steel industry based on the available raw material.
“If we have iron sands, our steel industry should be based on iron sands and
not on iron ore. Krakatau Steel, for example, is based on iron ore and it has
to import it from Australia. For me, this doesn’t make sense,” Sukhyar said.
According to Sukhyar, Fuhai’s and Ansteel’s steel plant will absorb the iron
sands concentrated by their subsidiaries in Cianjur, West Java. Iron sand
concentrates from Cianjur will be shipped to be processed in the steel plant in
Jambi.
To produce 1.75 million tons of steel, as much as 3.5 million tons of iron sand
concentrates will be needed.
