[Ferro-Alloys.com]：

  Nanjing Iron and Steel Group (Nangang), a Chinese steel giant, plans to set up a plant in Indonesia. If it is completed, the capital invested by Nangang will become one of the largest one in Indonesia.

  It is reported that Nangang will build its first iron and steel plant in Indonesia, with an annual capacity being 2.6 million tons. The construction of the iron and steel plant is expected to cost about 383.5 million dollars. Meanwhile, it also includes four furnace smelting facilities, which will take 18 months to complete. In order to speed up the construction of the plant, Nangang is cooperating with Tsingshan Group to jointly set up a joint venture, which Nangang holds 78% of the shares and the rest belongs to Tsingshan Group.

  According to the report, Indonesia is also one of China's steel importers and steel products from China are subject to Indonesian dumping laws and regulations. Therefore, Chinese steel industries plan to build plants in Indonesia.

  Apart from the potential market, Chinese steel producers are also interested in the abundant supply of raw materials in Indonesia.

  Iron ore and other raw materials and fuels account for a large proportion of the total cost of steelmaking. Nangang (600282.SH) is promoting the company's global distribution of raw and fuel resources, stabilizing the supply chain and reducing costs.

  On November 19, Nangang announced that it would plan to invest 383 million dollars (equivalent to 2.604 billion RMB at the exchange rate of 6.8) in Indonesia to implement an annual output of 2.6 million tons of coke in Indonesia. After the operation of the project, it is estimated that the average annual sales revenue will be $764 million to construct an overseas coke supply base.

  Nangang has an annual production capacity of 10 million tons of crude steel. Last year, the company spent 20.152 billion yuan on raw materials and 9.728 billion yuan on fuel and power, which totaled nearly 30 billion yuan, accounting for 71.82% of the total cost. Affected by the rising prices of iron ore and other raw materials, the cost increased by 2.632 billion yuan last year. If the project is implemented, the company can take the location advantage that is closer to Australia, the main international coking coal export country.

  According to the announcement, in order to promote globalization strategy, especially the global distribution of raw and fuel resources, Hainan Jinmancheng Technology Investment Co., Ltd. plans to cooperate with Guangdong Jirui Technology Group Co., Ltd. and PT. Indonesia Morowali Industrial Park to jointly establish Jinrui Technology and implement an annual output of 2.6 million tons of coke, with an estimated investment of 383 million US dollars, of which Hainan Jinmancheng holds 78% of the shares.

  The project plans to construct four coke ovens and complementary facilities, with construction period being 18 months. After its operation, it is estimated that the average annual sales revenue will be $764 million, the annual average sales profit will be $61.6341 million, and the total investment return rate will be 17.35%.

  Coke is the main raw material and fuel in metallurgy, machinery and chemical industry. The consumption of its furnace ironmaking in metallurgical industry is the largest, accounting for more than 80% of the total coke consumption. Metallurgical coke is the main fuel and reductant for long process blast-furnace iron-making. The state has published a coke capacity reduction policy, whose implementation is increasingly strict, especially in key areas such as Beijing-Tianjin-Hebei, Yangtze River Delta, Fenwei plain and etc. With supply less than demand, in recent half year, the price of coke has continued to rise, and the company expects that the price of coke will maintain a high level in a certain period of time.

  If the plant is to build in Indonesia, which is close to Australia, the international main coking coal exporter, then logistics costs will be lower and bring Australia into full play. As a member of Tsingshan Group, the company can also take advantage of the resources accumulated by Tsingshan Group in Indonesia. The significance of the project is that it opens up a new channel for company's coke supply, which is conducive to the stability of the company's coke supply.

• [Editor:Catherine Ren]