Krakatau Steel Hopes for Lower Gas Price

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  • A worker observe steel production process in a factory owned by Krakatau Steel in Cilegon. TEMPO/Tony Hartawan

    A worker observe steel production process in a factory owned by Krakatau Steel in Cilegon. TEMPO/Tony Hartawan

    TEMPO.CO, Jakarta - PT Krakatau Steel hoped that the gas price for industries will be lowered to US$5 per million metric British thermal unit (mmbtu) to promote efficiency in the company.

    "If the gas price can be lowered to the [US$5] level, then there will be a production cost efficiency of US$12.8 per ton," Krakatau Steel president director Sukandar said during a press conference in Jakarta on Monday, October 31, 2016.

    Sukandar added that if the price could be reduced further to US$3 per mmbtu, the company would be able to reopen three of its upstream factories.

    Sukandar revealed that his company purchase natural gas for US$7.4 per mmbtu from Pertamina and US$9.5 per mmbtu from state-owned gas company Perusahaan Gas Negara (PGN).

    "We have to pay higher prices for natural gas compared to other countries," Sukandar said.

    The energy and redactor costs in Indonesia, Sukandar revealed, are higher than in other countries. According to Sukandar, Krakatau Steel purchase natural gas for US$219 per ton.

    "In India, natural gas is available for US$138 per ton. In China, it's only US$121 per ton," Sukandar explained. 

    Sukandar admitted that the government's plan to lower gas prices would result in a decline in state revenue, since the current gas price includes the income tax (PPh) and the non-tax state revenue (PNBP).

    "The government must consider that there will be a multiplier effect when the gas price is reduced," Sukandar pointed out.

    Sukandar refused to reveal the growth of his company’s steel production if the gas price was to the lowered to US$5 per mmbtu. Sukandar pointed out that the Industry Ministry has calculated the figure.

    "But experts said that if Indonesia didn’t have a strong steel industry, then Indonesia wouldn’t be able to compete in the next few years," Sukandar warned

    FAJAR PEBRIANTO