At the heart of Krakatau Posco, the firm’s steel plant in Indonesia, workers fully clad in helmets, goggles and blue work wear watch the 3,800-cubic-meter blast furnace gurgling red-hot molten iron.
The blasts of hot waves and sweat glittering on workers' foreheads demonstrate the immense heat the furnace is generating — to be exact, 1,500 degrees Celsius (2,732 degrees Fahrenheit).
"Six tons of molten iron are produced per minute, which is enough steel to create six cars," an Indonesian worker tells this journalist with a dash of pride, his goggles reflecting the crimson fire in the works.
Located in the small city of Cilegon, around 100 kilometers (62 miles) west of Indonesia’s capital Jakarta, Krakatau Posco is the first integrated steel mill in Southeast Asia jointly established by Posco and state-run steelmaker Krakatau Steel.
Annually, the plant has a capacity to produce three million tons of steel.
The Indonesian affiliate has come a long way, struggling from consecutive losses for the first three years since its establishment in December 2013. When the Indonesian steel plant first started out as a fledgling business overseas, half of its annual capacity had to be supplied as slabs to Indonesia and other Southeast Asian markets as part of the deal with Indonesia’s state-run steelmaker Krakatau Steel, when the two companies back then had a share ratio of seven to three.
To make matters worse, the global steel price dipped in 2014 due to China’s dominance in the industry and geopolitical tensions such as Russia’s annexation of Crimea.
“It was, admittedly, a dark time for the Indonesian plant,” said Krakatau Posco’s President Director Kim Kwang-moo. “The company struggled to find footing and it eventually did, over the years with the support from the Indonesian government."
Krakatau Posco posted a record-high operating profit of $502 million, and revenue of $2.35 billion, in 2021. The following year, it logged an operating profit of $221 million, while revenue was $2.33 billion.
Krakatau Steel raised its stake in the Indonesian affiliate by 20 percent to 50 percent last year, while the rest of the 50 percent stake and management rights belong to Posco.
“It took a while, but Krakatau Posco will no longer wobble,” Kim said. “We set a goal to annually produce 10 million tons by 2030.”
Posco, Krakatau Steel and Indonesia’s Investment Ministry signed a memorandum of understanding (MOU) to invest $3.5 billion to expand their production capacity in July 2022. With the investment, the plant will build a second blast furnace and a cold rolling mill within the complex by 2026 to reach annual steel production of six million tons.
“Blast furnaces are the spine of the steelmaking company,” Kim said. “Establishing another one will definitely help stabilize steel production. Once the second one is up and running, we plan to conduct a thorough checkup on the first one so the production capacity can be optimized.”
The steel mill is also diversifying its portfolio to electric vehicles.
“Once the cold rolling mill begins production, we can produce automotive steel plates at the earliest by 2026, no later than 2027,” Kim said. “Hyundai Motor has already settled into the EV market, utilizing Indonesia’s abundant natural resources such as nickel, and we want to get a head start in EV supply [before other foreign competitors enter the market].”
Indonesia has the world’s largest nickel reserves estimated at 21 million tons, which accounts for 22 percent globally.
The company may also become the first sustainable steel plant in Southeast Asia, as it is in talks with oil giant Exxon Mobil’s Indonesian affiliate and the Indonesian government to advance carbon capture utilization and storage (CCUS) project sometime this year. The carbon emissions from the steelmaking process will be captured and delivered to be stored underground some 50 to 200 kilometers outside of the plant.
“Reaching net-zero emissions is a global initiative that all companies are ubiquitously aiming for,” Kim said. “Krakatau Posco plans to expand our CCUS business as well. We believe that in the near future, our primary clients such as carmakers’ carbon reports will also be reflected in their earnings reports, and there are possibilities that we can export this realm to overseas.”
With a total of 5,800 employees — including 3,100 from partner companies, 2,749 Indonesian employees in Krakatau Posco and 61 from Korea — the Indonesian affiliate is looking to train new talent and perhaps send them to Korea.
The company is currently working to implement steelmaking qualifications in specialized high schools or educational institutes in Indonesia.
“In the long term, we believe that it is right for Krakatau Posco to be led by Indonesian workers,” Kim said. “Posco is only here to do business. With our intangible asset in our know-how in steelmaking technology and management, we plan to expand further overseas, including recruiting and training new talent.
“As Korea’s fertility rate falls, we think that it is highly plausible for our experienced Indonesian workers to come and work for Korea as well.”
Source: Korea JoongAng Daily
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