03 Juni 2008
ArcelorMittal sees RI as regional production hub

The Jakarta Post Jakarta, The worlds largest steel producer Arcelor Mittal, which is looking to purchase a stake in Indonesias Krakatau Steel, considers the country a potential production base.

ArcelorMittal vice president Sudir Maheshwari said the demand for Indonesian steel would continue to rise and that state owned PT Krakatau Steel could lead the region in terms of production.

"Its important to note that Indonesia has all the parameters and characteristics of a regional hub for steel production.

"This is because of its large population, relatively low steel consumption and ideal geographical proximity to other nations in the region," Sudir said in a teleconference Monday.

Sudir said Arcelor Mittal, who is currently in talks with the government over the strategic sale of Krakatau Steel, would consider making Indonesia its regional hub for steel production should it succeed in purchasing a stake in the company.

Arcelor Mittal president Lakshmi Mittal moved the companys regional hub from India to Luxembourg after a 2006 merger between Arcelor of Luxemburg and Mittal of India.

"So we have experience in that area. Its not impossible for us to centralize our production hub in Indonesia since our businesses is divided by regions," Sudir said.

Sudir said such a move would have to go through extensive planning and that Arcelor Mittal was the perfect partner for Krakatau Steel to expand into a regional hub.

"The global steel industry is in a process of consolidation due to the rising prices of steel products. Most steel producers are looking at consolidating to meet rising demand," Sudir said.

The international price of a hot rolled coil, for example, rose to US$1,100 (Rp 10.2 million) per ton in May 2008 from $610 in December 2007.

"From our experience, the merging of Arcelor and Mittal proved to be very effective. Its in the best interest of Krakatau Steel to consolidate with us," Sudir said.

Sudir said a strategic sale of Krakatau Steel to Arcelor Mittal, which has an annual capacity of 120 million tons, would fast track the nation to a higher steel production capacity.

State Minister for State Enterprises Sofyan Djalil said Krakatau Steel needed fresh funds to expand its business and boost its production capacity. This is the main reason behind the governments intention to sell a stake in the company, he said.

Domestic demand is expected to increase between 8 and 10 million tons per year by 2012. Current domestic demand for steel stands at 6 million tons, of which 2 million are imported.

"Krakatau Steels current annual production is only 2.5 million tons. Through privatization, we expect to be able to rise production significantly," Sofyan said.

However, the strategic sale option has met opposition from Krakatau Steels management and staff, who prefer an initial public offering (IPO) instead.

Sudir said Arcelor Mittal would consider taking part in the IPO should the government cancel a strategic sale.

"But at this point, we are focused on the strategic sale option. It will create a win-win solution; Krakatau Steel will remain the nations flagship company and ArcelorMittal can also gain a stake in Krakatau Steel." (anw)

Source :  The Jakarta Post, Page : 13 

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