POSCO, South Korea’s largest steelmaker, will build a stainless steel plant in Indonesia jointly with China’s Tsingshan Holding Group, the world’s largest stainless steel producer, marking a shift of its stainless production from oversupplied China to one of the world’s fastest-growing markets.
The companies plan to construct a mill in Morowali Industrial Park on Sulawesi island, with an annual capacity of 2 million tons, comparable to Korea’s total stainless steel output, according to industry officials on Friday.
Under the agreement, POSCO will acquire a 44.12% stake in PT Xinheng Metal Indonesia from Tsingshan’s affiliate PT Makmur International Investment PTE, which will retain the remaining 55.88%. The two will co-manage the joint venture, which will build the plant.
Construction could begin as early as next year, with POSCO’s investment expected to exceed 1 trillion won ($708.3 million).
The move comes after POSCO in July sold its 1.1-million-ton stainless mill in China to Tsingshan, underscoring its intent to reposition Southeast Asia as a key stainless production hub.
The Korean steel giant already operates an integrated steel mill, Krakatau POSCO, with an output of 3 million tons in Indonesia, launched in 2013.
Indonesia’s relocation of its capital to Nusantara and its rapid infrastructure buildout are driving demand for stainless steel, used in building exteriors, industrial piping and factories.
The Southeast Asian country also holds the world’s largest nickel reserves, a key ingredient in stainless steel.
Industry officials say the combination of fast-rising demand and abundant supply makes Indonesia a natural choice for POSCO’s global expansion.
WIN-WIN FOR BOTH
For Tsingshan, based in Zhejiang province and producing 15.39 million tons of stainless steel annually, nine times POSCO’s domestic output, the partnership offers a chance to overcome longstanding quality concerns that have hindered its steel sales in the US and Europe.
The world’s seventh-largest steelmaker POSCO, widely regarded as a global leader in stainless technology, is expected to help the Chinese partner build both credibility and expertise.
The Indonesian venture is also projected to help the Chinese steel producer mitigate tariff barriers in advanced markets.
For POSCO, the plant is expected to serve as its new stainless base following its China exit, backed by a financially strong partner.
The global stainless steel market is hard to ignore as it is projected to grow 72% to $318.9 billion by 2032 from 2024, according to Cognitive Market Research.
The tie-up is also expected to ensure a steady supply of nickel from Tsingshan, the world’s top producer of the metal.
Stainless steel typically contains 8-12% nickel, with higher content enhancing corrosion and chemical resistance and enabling production of higher-value grades.
WORLDWIDE SUPPLY CHAIN REVAMP
The Indonesian venture is part of a broader restructuring under POSCO Holdings Inc. Chairman Chang In-hwa, who has pushed the company to diversify production beyond Korea and China.
In the US, the Korean steel leader is partnering with Hyundai Steel Co. to build a $5.8 billion electric-arc furnace mill in Louisiana to supply auto sheet locally and sidestep tariffs.
In India, it will jointly build an integrated plant in Odisha with JSW Steel Ltd. after recently expanding planned annual capacity to 6 million tons from 5 million tons to meet surging demand in the world’s most populous nation.
India’s steel consumption has already surpassed 100 million tons a year, twice that of Korea, and continues to rise on the back of heavy investment in high-speed rail, new ports and construction.
POSCO also runs integrated steel plants in South Korea, China and Vietnam.
By Jin-Won Kim and Woo-Sub Kim
jin1@hankyung.com
Sookyung Seo edited this article.
