Luxembourg lobbies Indonesia for ArcelorMittal-Krakatau merger

Mustaqim Adamrah,  The Jakarta Post ,  Jakarta  |  Wed, 11/12/2008 10:44 AM   

Luxembourg, where AncelorMittal's headquarters are located, is lobbying the Indonesian government to promote that the world's largest steel maker should set up a joint-venture with state steel producer PT Krakatau Steel (KS). 

The country made the move Tuesday, after ArcelorMittal's earlier intention to buy a stake in Krakatau was opposed by the latter's management and workers, who said the firm should instead sell its stake in the stock market through an initial public offering (IPO). 

"ArcelorMittal is looking for opportunities to invest in Asia and is interested in having a joint venture here in Indonesia," Luxembourg Economic and Foreign Trade Minister Jeannot Kreck* said after a meeting with Indonesian Industry Minister Fahmi Idris. 

"I think we will find a way to make this possible," he said. 

Ansari Bukhari, the ministry's director general for metal, machinery, textile and miscellaneous industries, said Fahmi in the meeting "supported whatever form of cooperation ArcelorMittal planned to have with Krakatau Steel". 

Kreck* is also scheduled to meet State Minister of State Enterprises Sofyan Djalil. 

ArcelorMittal, which produced 116 million tons of steel last year or the equivalent of 10 percent of global steel production, has long expressed interest in Krakatau to expand its business in Indonesia. 

Under the failed proposed partnership with Krakatau, ArcelorMittal said it would have built two steel factories, in Pasuruan (East Java) and in Banten, with a total investment of US$6 billion. 

The Mittal family started their global empire by establishing PT Ispat Indo in Sidoarjo, East Java, in 1976, already in the steelmaking business with an initial production capacity of 60,000 tons a year. 

Among the reasons behind the collapse of the plan were rumors suggesting that ArcelorMittal was performing poorly in many countries in which it operates. 

Sofyan earlier said the French government had to buy back its shares for 40 million euro ($50.94 million) to save its national steel company from poorly-performing ArcelorMittal. 

Kreck* said his visit was also to clarify such rumors. "I think people in Indonesia need to have more information about the way this company is working." 

"We never had any problems with this company (as reported). ArcelorMittal is complying with (our) high standards."

 The country is trying to boost the production capacity of local steel makers to meet increased domestic demand, which is expected to rise to between 8 million and 10 million tons per year by 2012. 

The current domestic demand for steel stands at 6 million tons, with 2 million tons imported. 

Four other global steel giants have expressed interest in acquiring a stake in Krakatau, including Australian-based BlueScope Steel and Indian-based Tata Steel. 

ArcelorMittal employs over 326,000 workers in more than 60 different countries in Asia, Africa, Europe and the United States.