Krakatau Steel plans to cut costs through joint venture with Posco

Krakatau Steel, the state-controlled steelmaker, expects the production of its joint venture Krakatau Posco to help cut costs and mitigate the risks of a weaker currency.

Krakata Posco, a joint venture with South Korea's Posco block, delivered its first production of steel slabs to its parent company last week, Krakatau Steel said in a statement. Krakatoa Posco will supply at least 1 million tonnes of board per year, equivalent to half of the total demand for this product in 2014, the statement said.

"Posco's Krakatau slabs will increase the company's competitiveness, production costs and delivery times. In addition, it will increase flexibility in order fulfillment," said Irvan Hakim, President and CEO of Krakatau Steel, in a statement. He added that the supply of slabs "will reduce the impact of fluctuations in the exchange rate of the rupee against the US dollar," as Posco's Krakatau is able to deliver products in a short period of time as it is located next to the Krakatau Steel plant.

Krakatau Steel suffered a net loss of $ 13.9 million last year due to lower steel prices and volatile local currencies. This year the company plans to increase sales of its steel products to 2.6 million tons from 2.38 million tons last year. The products produced by Posco Krakatau will go to meet the needs for steel used for infrastructure development through numerous units of Krakatau Steel.