South Korean Posco, Indonesian state-owned PT Krakatau Steel and the Indonesian government have signed an agreement to invest $3.5bn in expanding their local steel production capacity over the next five years, according to a memorandum of understanding signed on July 28. 

“We are delighted with the government’s support in realising the expansion of PT Krakatau-Posco. We will continue to actively cooperate in implementing the investment plans as agreed. PT Krakatau-Posco will be the largest integrated steel company in Southeast Asia,” said Krakatau Steel CEO Silmy Karim in a company statement. 


Mr Karim added that both companies agreed to more than triple the production capacity of the joint venture from its current 3 million tons per year to 10 million tons per year.

Krakatau Steel said in the statement that the investment will bolster its capacity to produce high-value steel products, such as automotive steel to support the government’s plan to make Indonesia a hub of the global electric vehicles industry.

PT Krakatau-Posco is a joint venture between both companies, located in Cilegon, Indonesia. POSCO said the companies will establish another blast furnace and cold rolling mill at the joint venture to ramp up  its production capacity. 

The companies said the Indonesian government will provide two companies with all necessary support for issuing permits for projects and investment incentives including tax benefits.