KRAS, Japanese Company to Make Automotive Steel

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The country’s largest steel maker PT Krakatau Steel (KRAS) and its Japanese partner will set up a new factory to produce cold-rolled coil (CRC) and galvanized CRC to meet the steel demand from the country’s fast-growing automotive industry.

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KRAS and Japanese partner Nippon Steel and Sumitomo Metal Corporation (NSSMC) signed an agreement on Wednesday to set up a joint venture to run the steel factory, which will be built with investment of US$378 million.

KRAS will have a 49 percent stake in the joint venture, while NSSMC will control the remaining 51 percent. The new company will built its factory in KRAS’ industrial estate in Cilegon, Banten. It will produce and sell CRC and galvanized CRC for the domestic automotive industry.

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In the automotive sector, CRC and galvanized CRC are used to produce a variety of automobile parts, such as body panels. Automotive manufacturing in Indonesia has developed rapidly in recent years thanks to steady increases in car sales in the country. The Indonesian Automotive Industry Association (Gaikindo) expects that the number of new cars sold will top 1 million for the first time this year.

“The new joint venture will enable Krakatau Steel to increase its competitiveness in galvanized technology and to provide raw materials for the domestic automotive industry,” Krakatau Steel president director Irvan K. Hakim said.

From January to September, publicly listed KRAS sold a total of 385,795 tons of CRC, a 42.4 percent increase from the same period last year. The products mainly went to the construction sector, according to the company’s financial statement. Sales of CRC accounted for 22.3 percent of KRAS’ total sales volume in the first nine months of the year. During the period, sales were dominated by hot-rolled coil (HRC) products at 49.1 percent.

Tokyo-based NSSMC, a merger between Nippon Steel Corporation and Sumitomo Metal Industries Ltd., manufactures and processes iron and steel products in Africa, Asia, Central America, Europe, the Middle East, North America and South America. Its annual production capacity currently stands at around 50 million tons of crude steel.

Both companies will discuss detailed terms and conditions of the joint venture in the first half of 2013, with the aim of entering into a definitive agreement, NSSMC wrote in a statement published on its website.

Besides partnering with NSSMC, KRAS also signed a joint venture agreement on Wednesday with Osaka Steel Corporation (OSC), a subsidiary of NSSMC, to establish PT Krakatau Osaka Steel. Krakatau Osaka Steel, whose investment value stands at $216 million, will produce steel beams and long products for the domestic construction industry.

KRAS will own a 49 percent stake in the joint venture, while OSC will hold a 51 percent share, with an option for both companies to increase their ownership in the future. Similar to Krakatau Nippon Steel Sumikin, Krakatau Osaka Steel will also be located in KRAS’ industrial estate in Cilegon.

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At the moment, OSC manufactures steel billets, steel beams and long products, with a total production capacity of 950,000 tons per year. According to Irvan, the joint venture will help KRAS strengthen its position in Indonesia’s long-products market. KRAS corporate secretary Andi Firdaus said KRAS would use its own funds to finance both joint ventures.

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Various airlines are upping their investment in the field of Aircraft Maintenance, Repair and Overhaul (MRO) along with soaring growth of the airline sector. The development is not only focused in the national capital, but also enjoying success in regional hubs, including Batam.

The Batam Free Trade Zone Authority (BPK FTZ) is actively seizing opportunities in the MRO sector at Hang Nadim International Airport. More than 100 hectares of land has been allocated at the airport for MRO activities, with a number of aircraft producers and airline operators already taking steps to develop their operations at the site.

Among them is Lion Air with a reported investment of US$100 million on a total of 10 hectares of land.

BPK FTZ Planning and Development Director Istono attributed the success in attracting Lion Air to the skills of his organization in recognizing prospective opportunities. The authority realized that the airline would need a maintenance hub when it heard news of its purchase of a sizable number of aircraft.

“After reading that Lion Air was experiencing some difficulties in developing its MRO at various airports in Indonesia, we approached them with the reassurance that the obstacles they faced in other areas wouldn’t be present in Batam. Ultimately, they chose Batam,” he said.

Lion Air President Director Rusdi Kirana signed a Memorandum of Understanding with BPK FTZ Chairman Mustofa Widjaja on Oct. 28, 2011, on the development of the airline’s MRO facility in Batam, scheduled for operation by the end of 2013. Its facility will be able to accommodate eight Boeing 737 aircraft.

“Our close proximity to Singapore is an advantage, and it’s easier and more convenient to obtain spare parts at a facility in Batam because of its free trade zone status. We are also aiming to attract foreign aircraft producers to select Batam as their maintenance center,” Istono said.

The authority is confident that its facilities will serve airline’s needs. With a runway measuring 4,025 meters, the airport is able to accommodate large-size aircraft up to the Airbus A380; its apron measures 110.541 square meters; its terminal with four jet bridges can serve 3.3 million passengers annually; storage facilities measure 16.230 tons, and it has fuel storage capacity of 52,000 kiloliters.

“We are targeting development of from six to eight MRO firms at Hang Nadim International Airport Batam. It will require a large number of technical staff, and perhaps one of the issues we face is the readiness of qualified human resources,” he said.

In anticipation of the demand for aeronautical engineering workers, BPK FTZ has called upon administrators of higher education institutions and other educational facilities, including Batam Polytechnic and vocational schools, to open aeronautical engineering programs of study to provide job opportunities for the area’s young people. (Tassia Sipahutar, The Jakarta Post)

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