Jakarta. Indonesia’s sovereign wealth fund Danantara is set to break ground next month on an upstream steel plant with annual production capacity of 3 million tons, as part of efforts to boost domestic output and reduce reliance on imported steel.

The project is scheduled to begin construction in March and is designed to strengthen Indonesia’s industrial supply chain by expanding upstream capacity, Danantara Chief Operating Officer Dony Oskaria said on Wednesday.

Dony said Indonesia urgently needs additional upstream steel production to ensure national industrialization is supported by a strong domestic raw-material base.

“Today, our steel demand is still dominated by imports,” he said during a meeting with lawmakers in Jakarta. “That’s why we will move ahead with groundbreaking next month, with production capacity of around 3 million tons per year.”

He described steel development as a strategic pillar for the sustainability of Indonesia’s manufacturing sector, noting that domestic demand continues to be met largely by foreign suppliers.

The steel plant is being developed through a partnership between state-owned steelmaker Krakatau Steel and China’s Delong Steel Group. The facility will be built on a 500-hectare site in the Cilegon Industrial Area in Banten.

Output from the new facility is expected to support a wide range of downstream industries, helping anchor future industrial growth.

Dony also stressed that large-scale investment in steel must be accompanied by supportive government policies to ensure long-term viability, including measures to protect domestic producers from unfair competition.

“There must be government backing to protect the industries we are developing,” he said. “Without that support, it will be difficult for these industries to compete going forward, both at home and globally.”

Danantara Chief Executive Officer Rosan Roeslani said earlier this week that the fund is also preparing to develop six coal-based dimethyl ether (DME) processing facilities as a substitute for cooking gas, as Indonesia continues to rely heavily on imported liquefied petroleum gas.

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