Chief Transformation Officer GRP Kelvin Fu (third from left) and IFC Country Manager for Indonesia and Timor-Leste Euan Marshall (fourth from left) at a signing ceremony held during the Indonesia International Sustainability Forum
Jakarta, Indonesia, September 6, 2024 – To advance decarbonization in Indonesia's steel industry, IFC today announced a loan to PT Gunung Raja Paksi Tbk (GRP), a leading Indonesian steel producer. Proceeds will help to boost low-carbon steel production in Indonesia, reducing greenhouse gas (GHG) emissions and supporting the country's climate goals.
IFC, a member of the World Bank Group and the largest global development institution focused on the private sector in emerging markets, is providing up to $60 million Indonesian rupiah equivalent to GRP, which the company plans to use to expand low-carbon flat steel production using Electric Arc Furnace (EAF) technology. The financing is expected to propel GRP's capacity to recycle a variety of scrap metals and produce high-quality steel with significantly lower emissions, cutting emissions by more than half compared to the global average for steel production. The project will also help Indonesia meet growing steel demand and reduce its reliance on high-carbon steel imports.
Steel is a vital building material that has long been central to global infrastructure development and urbanization. However, it is also a major GHG emitter, accounting for about eight percent of global GHG emissions. With global steel demand expected to exceed two billion tons by 2040, driven significantly by growth in Asia, there is a pressing need to develop innovative approaches for reducing the carbon footprint of this hard-to-abate sector.
"Through this partnership with IFC, GRP will continue to set new bars for decarbonizing steel production in Asia," said Kimin Tanoto, GRP's Chairman of Executive Committee. "This first in a generation investment recognizes GRP's early leadership as one of the very first, and still very few, operators of low- carbon steel mills in Asia. The steel industry is critical to the prosperity of Asia and the wider world, but the science is clear, we must rapidly decarbonize as a sector to withhold and grow this prosperity for future generations. If steel companies are not willing to embrace the green transition, their assets are risk becoming stranded. Sustainability has and always will be GRP's guide forward."
In addition to the loan, IFC has signed an Advisory Engagement Letter with GRP to develop and implement its decarbonization strategy and support GRP's efforts to reduce GHG emissions in alignment with international best practices. This includes exploring different financing options to support GRP's decision to entirely decommission the company's newly built but never operated blast furnace, as well as improving energy efficiency of the company's EAF and assessing new downstream process options and technologies. As part of the advisory engagement, IFC will also support GRP in identifying new market opportunities and exploring high-value steel products compatible with EAF production, thereby solidifying GRP's leadership in national decarbonization efforts. This will support Indonesia in achieving the goal of reaching net-zero emissions by 2060.
"Our partnership with GRP is a significant step in our commitment to supporting industrial decarbonization in Indonesia, and marks IFC's first steel investment in Asia in over a decade," said Euan Marshall, IFC's Country Manager for Indonesia and Timor-Leste. "We are delighted to provide both investment and advisory assistance to support GRP in its journey to develop a commercially and environmentally sustainable business."
Indonesia is one of the largest steel producers in Southeast Asia and the fifteenth largest producer globally. The country also imported 6.6 million tons of steel in 2021, most of which was made using Blast Furnace production. With annual steel production in Indonesia expected to grow from 16 million tons in 2023 to 33-35 million tons by 2030, driven by the growing demands of expanding infrastructure, housing, and automotive sectors, efforts to decarbonize the sector are critical to achieving a low-carbon future.
About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2024, IFC committed a record $56 billion to private companies and financial institutions in developing countries, leveraging private sector solutions and mobilizing private capital to create a world free of poverty on a livable planet. For more information, visit www.ifc.org.
About GRP
PT Gunung Raja Paksi Tbk (GRP) is a member of Gunung Steel Group, one of the largest private steel companies in Indonesia. Established in 1970 in Medan, North Sumatra, our company started the business by producing hot steel, gradually producing beams and steel sheets. In 1991, PT Gunung Naga Mas transitioned to PT Gunung Raja Paksi (GRP). GRP is in Cikarang Barat, West Java Province, Indonesia, covering more than 200 hectares.
With more than 50 years of experience in the steel industry, GRP has the production capacity of 1,300,000 tons of high-quality low-carbon steel annually certified by local and international certification organizations. GRP's work aligns with international standards such as the Sustainable Development Goals (SDGs), the Global Reporting Initiative (GRI) and ResponsibleSteel Principles.
The new capital investment from IFC will upgrade GRP's electric furnace to reduce heat loss, as well as for funding capital expenditure, downstream capacity expansion, cost-efficiency and productivity improvement measures of existing infrastructure, and scrap inventory.
The company is supported by a dedicated workforce and strong corporate values. It launched its ESG Strategy Handbook in October 2022 to guide the company's business strategy, and Net Zero Roadmap in February 2023.
