PT Krakatau Steel (Persero) Tbk is charting a recovery path with a proposed $500 million capital injection aimed at revitalizing its operations and achieving sustainable profitability. Burdened by legacy debt from a 2019 restructuring, the company faces limited access to bank financing and declining core revenues. With support from Danantara and legislative backing, Krakatau Steel is positioning itself for a turnaround that could reshape Indonesia’s strategic steel industry.
Key Facts & Background
- Krakatau Steel is pursuing $500 million (approx. Rp8.34 trillion) in working capital funding from Danantara to boost production and profitability.
- The company remains under pressure from $1.7 billion in restructured debt, including $1.4 billion in principal and $338 million in interest and penalties.
- Due to its debt burden, Krakatau Steel currently lacks access to conventional bank financing.
- The company reported a net loss of $148 million in 2024, reflecting constrained operations and limited capital.
- In 2025, Krakatau Steel engaged in negotiations with state and private banks, aiming for a debt haircut to be finalized by year-end.
- If successful, the restructuring could yield $392 million in financial gains, turning losses into profits.
- Core revenue for 2025 is projected at $1 billion, down from $2.2 billion in 2022, due to insufficient working capital.
- With Danantara’s funding, the company targets a production increase of 120,000 tons of steel per month (1.3 million tons annually).
- Management forecasts net profits of Rp1.5–1.6 trillion annually starting in 2026, with EBITDA margins rising from 0.7% (2025) to 6.3% (2026) and 7.6% (2028).
- Indonesia’s House Commission VI has formally endorsed the debt restructuring and capital injection plan to ensure operational continuity and raw material supply.
Strategic Insights
Krakatau Steel’s bid for fresh working capital marks a critical juncture in the company’s long-running effort to regain financial stability and operational efficiency. As Indonesia’s flagship steel producer, its performance carries implications not only for industrial supply chains but also for national infrastructure development and strategic autonomy in raw materials. The proposed $500 million injection from Danantara is more than a lifeline—it’s a catalyst for transformation.
The legacy of the 2019 debt restructuring continues to cast a shadow over Krakatau Steel’s financial flexibility. With $1.7 billion in obligations, the company’s inability to access bank financing has stifled production and eroded competitiveness. The anticipated haircut and refinancing deal, if executed successfully, could reset the balance sheet and unlock latent potential. This financial reset is essential for restoring investor confidence and enabling long-term planning.
Operationally, the projected increase in steel output—1.3 million tons annually—signals a shift toward scale and efficiency. This expansion aligns with Indonesia’s broader industrialization goals, particularly in construction, automotive, and manufacturing sectors. A revitalized Krakatau Steel could reduce import dependency, stabilize domestic steel prices, and support downstream industries. The ripple effect would extend to job creation, regional development, and enhanced trade resilience.
From a governance perspective, the support from DPR RI’s Commission VI reflects a growing recognition of the strategic importance of state-owned enterprises (SOEs) in national economic recovery. The endorsement of both debt restructuring and capital provisioning underscores a policy shift toward proactive intervention and industrial safeguarding. It also sets a precedent for future SOE revitalization efforts, where financial engineering is paired with operational reform.