Tata, Essar seek stake in Krakatau Steel

The three companies, along with ArcelorMittal, the world's biggest steelmaker, have sent letters expressing their interest in buying a stake in PT Krakatau Steel, Ansari Bukhari, director general of metal, machinery, textile and miscellaneous industries at Indonesia's industry ministry, said in Jakarta.

A larger partner will help Krakatau Steel gain expertise and double capacity to 5 million metric tonnes a year, Bukhari said.

Overseas steelmakers and Krakatau may benefit from rising demand for the metal in Asia's third-most populous nation as the lowest interest rate in three years boosts demand for houses and cars.

The companies "are interested to get into Krakatau Steel as they see the huge market potential in Indonesia,'' Bukhari said. Southeast Asia's biggest economy needs as much as 7 million tonnes of steel a year, he said.

Indian companies, fuelled by accelerating economic growth and gains in the rupee, are buying rivals abroad to add production capacity. Last year, Essar bought Algoma Steel Inc. and Minnesota Steel Industries LLC in North America. The company agreed to buy US-based Esmark on April 30.

"We continuously look for opportunities,'' said J Mehra, chief executive officer at Essar Steel Holdings, which owns India's third-biggest non-state steelmaker.

Earlier today Prashant Ruia, director at Essar Group said the company aims to increase production to 25 million tonnes by 2012.

Tata may present its plan for Krakatau in May, Bukhari said. Tata Steel bought UK's Corus Group last year for $12 billion, lifting the company to sixth from 56th in global rankings of steel producers.

India's steel demand is expected to grow 10 per cent annually over the next five years and is likely to touch 124 million tonnes by 2012, from 50 million tonnes annually, according to government estimates.

ArcelorMittal, owned by billionaire Lakshmi Mittal, met Indonesian
President Susilo Bambang Yudhoyono on April 10 to discuss plans to buy a stake in Krakatau and secure nickel and iron ore from PT Aneka Tambang. BlueScope, Australia's largest steelmaker, is "obviously interested" in the Indonesian government's talks on "the future" of Krakatau Steel, BlueScope said in an e-mail statement today.