Kobe Steel plans Indonesia factory to improve coal quality

Jakarta (ANTARA News) - Kobe Steel Ltd. said Wednesday it will break ground on a large demonstration plant Thursday in the Satui mine in southeastern Kalimantan, the Indonesian part of the island of Borneo, that will improve the quality of low-grade brown coal found in abundance in the area.

Under the project estimated to cost 8 billion yen, the operation is slated to begin on a commercial basis by the second quarter of 2010 with a view to selling upgraded coal for use in power generation, the company told Kyodo.

The demonstration plant is scheduled to come onstream in October next year, processing 600 tons of coal per day and the daily output is expected to reach 5,000 tons when the operation hits its stride.

Low-grade coal in the area generates little heat because of its high moisture content. Kobe Steel aims to evaporate the moisture by heating the coal with oil

in a manner similar to the way food is fried to prepare tempura dishes, company officials explained.

The heat output of the Indonesian coal is projected to increase 50 percent or so as a result.

Japan is the world's largest coal importer and is now finding it vitally important to secure the supply of quality coal it needs because China is importing ever greater quantities of coal.

Indonesia, meanwhile, became a net importer of oil in 2004 because of growing domestic oil demand, even though it is also an oil producer. The country is concerned that its reserves of high-grade coal could run out in several years' time.

Tokyo and Jakarta therefore have been backing the Kobe Steel project to turn low-grade coal into quality coal.

The upgraded Indonesian coal should produce less ash and sulfur than higher-grade Australian coal, which is now commonly used in Japan, Kobe Steel said.