PT Krakatau Steel Tbk (IDX: KRAS), a steel-maker owned by the government, to operates second hot strip mill in Cilegon, West Java - Photo by Industry Ministry Office

JAKARTA (TheInsiderStories) PT Krakatau Steel Tbk (IDX: KRAS), a steel-maker owned by the government, to operates second hot strip mill in Cilegon, West Java, said the ministry of industry today. The project its expecting to help the government’ import substitution program by 35 percent in 2022.

In a written statement released on Thursday (03/25), the minister, Agus Gumiwang Kartasasmita, explained with the operation of the second factory, the hot rolled coil (HRC) will increase to 3.9 (MT) per year from now 2.4 million tones. In the first stage, the production capacity is 1.5 MT of HRC per year and for the next stage it is targeted to increase to 4 million tons per annum, he adds.

Its planned that the investment of US$521 million project will be inaugurated by President Joko Widodo in the third week of April. The product is expected to be able to fill the national steel market, especially for the automotive supply chain and infrastructure development.

Kartasmita stated, in 2021, the basic metal industry sector is estimated to grow 3.54 percent. This, he asserted, showed that the steel industry have a resilience and is able to survive during the pandemic.

While, CEO of Krakatau Steel , Silmy Karim, claimed with the addition plant the company can contribute 65 percent of HRC sales in the local market. The steel producer targeting the HRC and Cold Roll Steel sales to reached 2.04 MT in 2021 from last year 1.60 MT. Of the total the state manufacturer has exported 128,342 tones to various countries.

This year, he continued, the company targeting the export numbers of 155,000 tones, up 17.20 percent compared to last year. Major importers of their products are Malaysia, Australia, Spain, Portugal and Italy. He asserted, “We are still negotiating for the next shipment to Europe in 2021. We are also starting to explore new export market shares to India in the second semester of 2021.”

Beside, improve the sales targets, Krakatau Steel also plans to bring the unit, PT Krakatau Tirta Industri, a clean water operator, to list its shares on Indonesia Stock Exchange in this year. Beside, the Cigading port manager, said Karim, his office prepared PT Krakatau Bandar Samudera to run an initial public offering (IPO) in this year.

The series of IPOs will add to the corporate actions undertaken by group, included spin-off of a blast furnace to an experienced strategic partner. The manufacturer had stopped operating its blast furnaces since Dec. 5, 2019 because unable to produce steel with a competitive prices.

Krakatau has issued mandatory convertible bond (MCB) worth of Rp2.2 trillion (US$152.77 million) to state financial firm, PT Sarana Multi Infrastruktur. The notes have a tenure seven years and will be converted into shares in 2027. In total, said the finance director, Tardi, the company will get capital injection from the government worth of Rp3 trillion. The remaining Rp800 billion will be releases at the end of 2021.

The share owned by the public will be diluting from 20 percent to a around 14 to 16 percent caused of the corporate action. After the issuances of MCB will be followed up by rights issue program to maintained the public ownerships stay at 20 percent, he told the media on Dec. 29.

The issuance, said Tardi is part of the government to injects capital to Krakatau Steel in the context of National Economic Recovery program, which was agreed on Oct. 6. The funding, he continued, will be use to support the upstream projects and to refinances part of the company’ debt.

Since last year, the manufacturer plans to finalize the debt restructuring amounting to $2.2 billion. Karim stated that the issuer still has debt with four banks such as PT Bank CIMB Niaga Tbk (IDX: BNGA), Standard Chartered Indonesia, PT OCBC NISP Tbk (IDX: NISP) and PT Bank DBS Indonesia, which reached 22 percent of its total debt.

Industry ministry has reported, national steel producers has scrapped steel import by 34 percent compared to previous year and the production jumped by 30.25 percent from 8.89 MT to 11.58 MT. While, the steel imports for slabs, billets and blooms types were 3.46 million tones in 2020, lower than the previous year which reached 4.66 million tones.

This year, the government targeting to lowering the steel import by 50 percent from last year realization. In total, the capacity production of the steel producers, reflected in steel raw materials (slab, billet, bloom) reached 13.10 MT, rose 30.25 percent compared to 2019. In addition, the utilization capacity increased to 88.38 percent from 2019 of 67.86 percent.

US$1: Rp14,400

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