Jakarta. State-owned gas utility company Perusahaan Gas Negara will supply gas to steel producer Krakatau Nippon Steel Sumikin's galvanizing, annealing and processing plant in Cilegon, Banten, which became operational on Tuesday (07/08).

The gas supply is part of a $300 million deal with Krakatau Nippon Steel Sumikin (KNSS) to support the national automotive industry.

PGN secretary Rachmat Utama said the company won the bid in a tender in April 2016.

PGN has completed development of infrastructure as scheduled on Feb. 1 last year.

Rachmat said PGN could potentially pipe 1,32 million cubic meters of gas per month as demand from the factory increases over time.

After conducting production tests over the past year, KNSS officially opened the factory on Tuesday during a ceremony attended by the president director of Krakau Steel, the Japanese ambassador to Indonesia, and representatives of the Ministry of State-Owned Enterprises and the Ministry of Industry.

"With this factory, we hope automotive companies in Indonesia, such as Toyota, Suzuki, Nissan, Daihatsu and others, could diversify their imported supply chain and acquire their material from KNSS instead, so PGN can support KNSS in its contribution to the national economy," Rachmat said in a statement.

The factory has an annual production capacity of 480,000 metric tons of steel products, such as hot-rolled steel coil, cold-rolled steel coil and galvanized steel, widely used in the automotive industry.

Harjanto, director general of the metal industry, machinery, transportation equipment and electronics at the Industry Ministry, expressed his appreciation of the factory, which will create 280 jobs. He added that steel factories in Indonesia can now not only supply the construction sector, but also the automotive industry.

"This KNSS factory will boost the country's capacity. The Indonesian economy will also feel the benefits due to the potential cuts in spending on imports, taxes and the use of local raw materials and manpower," Harjanto said.

KNSS director Djoko Muljono added that his company's experience in producing high-quality steel sheets would improve the standard of locally produced cars.

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