Posco plans to expand a joint venture in Indonesia

South Korean Posco is expected to increase its investment in Krakatau Steel following the signing of the Comprehensive Economic Partnership Agreement (CEPA) between South Korea and Indonesia. PT Krakatau Posco is a joint venture between Posco and PT Krakatau Steel.

On Monday, the two countries completed seven-year negotiations and eventually signed CEPA. Indonesia will remove tariffs on some steel products and auto parts from South Korea. In addition, Indonesia also hopes to attract more South Korean investment. Over the weekend, Indonesian President Joko Widodo met with a number of Korean companies including Posco, Hyundai Motor, LG Group, SK Global, Samsung Electronics, Samtan Gas and Cheil Jedang.

At this meeting, Posco announced that it would invest over $ 4 billion to increase PT Krakatau Posco's steel capacity to 10 million tonnes by 2025.

Posco may also build a new joint venture for the production of HRC and CRC, according to local media in Indonesia. Krakatau Posco plans to start selling 750,000 tonnes of HRC steel products from next year, while CRC's products are reportedly still under discussion.

Posco's local partner in Indonesia, PT Krakatau Steel, suffers from heavy debt and high production costs, leading to increased net losses in the third quarter of 2019. In the third quarter, the company's revenue decreased by 17.5% year on year. year to $ 1.05 billion, and the net loss rose to $ 211.91 million from 37.38 million a year earlier.

Despite the fact that "Krakatoa Posco" began to bring operating profit in 2018, in the third quarter of 2019 it again went to a loss. The plant lost $ 6 million in the third quarter of 2019 as sales fell to 713,000 tonnes in the same period. Krakatoa Posco said revenues fell due to blast furnace maintenance and lower sales prices and demand.