How is Indonesia Tsingshan Stainless Steel Industrial Park “Formed”?

Tsingshan companies have been focusing on the production of stainless steel for 26 years since 1992 and have become a large-scaled private enterprise cluster. In 2016, crude stainless steel output of the companies reached 5.8 million tons with a sales income of RMB102.8 billion and over 30, 000 staff.

The annual output in 2017 was 7.48 million tons, which was not only the most in China but in the whole world. The main raw material of stainless steel is nickel as it takes up 60% to 70% of the total cost.

Therefore, obtaining nickel minerals means holding the right to control costs and the chance for the enterprises to get rid of the influence of fluctuating global nickel price. There is no rich nickel mineral in China, so Tsingshan Steel has brought resource development of nickle minerals into its business planning in its global layout since 2008.

In 2009, Tsingshan companies entered Indonesia where there were rich nickel resources and started investments there. In October, 2013, Indonesia Tsingshan Industrial Park signed the contract and became an important cooperation project between China and Indonesia.

By now, Tsingshan companies spent less than five years in turning the remote fishing village Sulawesi into a modern industrial park that combined the whole industrial chain including nickel minerals exploiting, ferro-nickel smelting,ferro-chrome smelting, stainless steel smelting and casting, stainless steel hot-rolling and annealing together.

Indonesia Tshingshan Industrial Park will be built into an industrial base with three million tons annual output of stainless steel by around October, 2018.

State Leaders Witnessed Contract Signing of Indonesia Tsingshan Industrial Park
Indonesia has long been known as “Country of Islands”. Before the restriction order on crude ore export in the beginning of 2014, Indonesia exported the most lateritic nickel minerals in the world.

With the development of economy, Indonesia was not contented with being “the biggest exporting country of nickel minerals in the world”. Instead, it hoped to increase the added values of its mineral resources. On this occasion, Tsingshan companies landed on Indonesia’s ferro-nickel smelting industry and invested in the construction of Indonesia Tsingshan Industrial Park.

The park is located in Bahodopi Town, Morowali County in central Sulawesi Province in Indonesia, only one mile away from the sea coast. The total planning land covers an area of 2,000 hectares. The land owner and controller of the park is Tsingshan Park-developing Co. Ltd. (PT. IMIP) in Indonesia Economy and Trade Cooperation Zone. PT.IMIP is jointly established by Shanghai Decent Group (a group under Tsingshan Group, share holding 66.25%) and Bintang Delapan (share holding 33.75%).

In July, 2013, the first entry project of Indonesia Tsingshan Industrial Park, Sulawesi Mining Investment (SMI) reached 30, 0000 tons annual output of ferro-nickel and 2×65MW self-contained electric power plant started construction, covering an area of 95 hectares. On 3rd October 2013, Xi Jinping, President of PRC, and Susilo, President of Indonesia at that time, attended the signing ceremony of China-Indonesia business agreement in Jakarta in Indonesia. It was also during the visit that President Xi Jinping proposed the initiative to build “The 21st Century Maritime Silk Road”.

Indonesia Tsingshan Industrial Park turned Indonesia’s Stainless Steel Output from Zero to No. 2 in the World
Indonesia Tsingshan Industrial Park is managed by the developing company of the park. At its commencement, there was no electricity, no water, no houses or roads. We constructed everything ourselves.

What did Indonesian government do during this period of time?
They built low-rent houses and technological colleges.

The first entry project of the park started construction in July 2013. on 29th May 2015, Joko Widodo, present President of Indonesia, inspected the park and announced the launch of production of the project. After that, the first batch of ferro-nickel products and stainless steel approached market.

In 2015, Indonesia Tsingshan Industrial Park was awarded “Promising Industrial Park” by Indonesia Ministry of Industry. In August 2016, it was acknowledged as overseas trade and economic cooperation zone by Department of Commerce and Ministry of Finance of China.

Output of ferro-nickel was 1.5 million tons in Indonesia Tsingshan Industrial Park for the four quarters of 2017, converting into 0.15 million pure nickel. Output of stainless steel was 2.0 million tons.

By the end of 2017, total actual investments of Indonesia Tsingshan Industrial Park reached US$3.415 billion with the annual output of stainless steel reaching 2.0 million tons, hot rolling 3.0 million tons, freeo-chrome 0.6 million tons and power generation capacity 1.26 million KW.

All projects in the whole industry chain in the park will finish constructing and begin mass production by around October 2018. Then, output of ferro-nickel will reach 2.0 million tons, stainless steel 3.0 million tons, ferro-chrome 0.6 million tons, and power generation capacity 1.96 million KW.

What does 3.0 million tons of stainless steel output mean? In 2016, crude stainless steel output in the world was 44.9 million tons, so the output of the park took a relatively high portion. In this way, output of Indonesia’s crude stainless steel soared to the second place in the world from zero (Of course, the first place was taken by China). President Joko Widodo was very pleased with all the data!

Land-related Affairs were Nothing Similar with Those in China regarding Developing an Industrial Park in Indonesia
Indonesia Tsingshan Industrial Park covers a total area of 2,012 hectares with 600 hectares of industrial construction land being approved by Indonesian government. Why does industrial construction land take up such a small portion in such a large total area? Because we leave much of them “blank”. Why? It has something to do with the land system, legal environment, social culture and historical tradition of the country.

In China, the state owns the land. However, in Indonesia, individuals own the land and private properties are sacred and inviolable. The differences in land ownership force us to deal with the development of the industrial park in a way totally different from what we do at home.

Developing an industrial park in China benefits the developer in at least three aspects: first, with the government granting the land, the industrial park gets grade one land developing right and can change agricultural land into industrial land, which increase land land for the developer; second, as most developing zones in China are in the surroundings of big cities, the government allows the developer to change certain part of industrial land into commercial land, which increase more land value for the developer; third, if the industrial park attracts great investments and taxes increase correspondingly, the government will return certain part of the taxes to the developer.

In Indonesia, we enjoy none of above benefits: First, grade one land developing right is open and everyone can develop the land as long as they apply to the government and obtain approval; Second, Bahodopi Town, Morowali County in central Sulawesi Province of Indonesia, is a poor and remote village.

Beside our industrial park are minerals and then the coastlines of the Pacific Ocean. It is far away from residential centers, which makes it impossible to open up commercial development like real estate; Third, nobody will return taxes to you.

Therefore, the only advantage we enjoy for developing industrial parks in a foreign country is maybe we can divide the land into pieces and rent or sell them out by wholesales. This may be workable in light industry or textile industry but it is nothing possible in metallurgical industry like ours.

Above are the practical situations we have to face in Indonesia.

Brief Introduction to Tsingshan Industrial Park in China-Indonesia Comprehensive Industrial Park
Indonesia Tsingshan Industrial Park is located in Bahodopi Town, Morowali County in central Sulawesi Province in Indonesia, only one mile away from the sea coast. The founding enterprise (land owner and controller of the park) is Tsingshan Park-developing Co. Ltd.(PT. IMIP) in Indonesia Economy and Trade Cooperation Zone. PT.IMIP is jointly established by Shanghai Decent Group (share holding 66.25%) and Bintang Delapan (share holding 33.75%).

In 2015, Indonesia Tsingshan Industrial Park was awarded “Promising Industrial Park” by Indonesia Ministry of Industry. In August, 2016, it was acknowledged as overseas trade and economic cooperation zone by Department of Commerce and Ministry of Finance of China.

Indonesia Tsingshan Industrial Park covers a total planning land of 2,000 hectares with all-ready entry channels in sea, on land and in air and 1.26 million KW electricity power plants. In the park, there are two 100, 000-ton bulk wharves, one 30,000-ton bulk wharf, twelve 5,000-ton wharves, ten satellite television receiving systems, more than eighty residential buildings, four office buildings, one reception building, four grade-two communication bases, one set of abstraction work and two mosques. By the end of 2017, actual completion investments of the park and entry projects reached US$3.415 billion.

Source: CGGT