CILEGON, Indonesia ― The city of Cilegon, a coastal city in Banten province, Indonesia, is emerging as one of the most vibrant industrial cities in Southeast Asia, with the launch of the biggest steel mill in the region early this year.

Krakatau POSCO ― a joint venture between South Korea’s POSCO and Indonesia’s state-run Krakatau Steel ― has run the integrated steel mill with a blast furnace here since it completed the plant on Dec. 23.

POSCO, which holds a 70 percent stake in the venture, invested $3 billion to build its first overseas integrated steelwork in Indonesia, setting an eye on fast-growing steel demand in Southeast Asia.

POSCO’s steelwork in Cilegon will produce up to 3 million tons annually of steel products, including slabs and steel plates for shipbuilding.

“POSCO has tapped Indonesia ahead of other global rivals as the country itself has strong steel demand and is also geographically well positioned to act as a regional base for steel supply in the region,” Krakatau POSCO president Min Kyung-zoon told the Korean press.

“I am sure that Krakatau POSCO has enough room for growth, based on the outlook for steel demand in Indonesia and its neighboring countries.’’

Steel demand in Indonesia, in particular, grew by 10.7 percent on average annually between 2009 and 2012, according to the South East Asia Iron and Steel Institute.

Indonesia’s domestic steel production capacity, however, is far short of demand. About 60 percent of the country’s total steel demand is met by imports.

“Annual per capita steel consumption still hovers around 50 kg in Indonesia, (which is one-twentieth that of Korea), meaning that steel demand of the emerging economy with a population of 250 million will continue to grow,” Min said.

To ensure success in Indonesia, POSCO has increased contributions to the local community to build a positive corporate image.

“POSCO has made economic and social contributions to the city of Cilegon by offering jobs and conducting a variety of socially responsible activities,” Cilegon Mayor Tubagus Iman Ariyadi told The Korea Herald in an interview.

Krakatau POSCO said it has created more than 2,000 jobs in the area, and developed programs to help the community, including education and training programs.

“We hope that POSCO will continue to share its growth with the city,” the city mayor added.

POSCO is also facilitating city-level partnerships between Korea and Indonesia.

The Cilegon city mayor will visit Korea next week to form a partnership with the city of Gwangyang, South Jeolla Province, home of POSCO’s Gwangyang steelworks.

“Krakatau POSCO will support the economic development of Indonesia similarly to how POSCO has served Korea,” Min said.

By Seo Jee-yeon, Korea Herald correspondent
(jyseo@heraldcorp.com)