Bank of China contributes $90 million to $545 million syndicated loan for Phase 1 of Indonesia Lithium Project (Morowali Industrial Park) Project (Linked to Project ID#96396)

On December 24, 2021, PT Dexin Steel Indonesia (德信钢铁 or 德信钢铁有限公司) — a special purpose vehicle and joint venture between Delong Steel Singapore Projects Pte Ltd [45% ownership stake], Shanghai Decent Investment Group Co Ltd [43% ownership stake], and Indonesia Morowali Industrial Park PT [12% ownership stake] — signed a $545 million syndicated loan agreement with a group of Chinese and non-Chinese lenders for Phase 1 of the Indonesia Lithium Project (Morowali Industrial Park) Project. Participants in the loan syndicate included Bank of China ($90 million), the Industrial and Commercial Bank of China ($90 million), and China Minsheng Bank ($150 million). The loan consists of two tranches (facilities): a $500 million amortizing term loan tranche with a 5-year maturity and a $45 million revolving credit facility tranche with a 5-year maturity. The borrowing terms of the loan are unknown. However, it is known that the facilities ‘fully secured by the project with customary [project finance] securities.' It is additionally known that Delong Steel issued a corporate repayment guarantee worth 72.22% of the tranches (facilities) and Fujian Tsingtuo Nickel Industry Co. Ltd. issued a corporate repayment guarantee worth 27.78% of the tranches (facilities). Bank of China's contribution is captured via Project ID#96372 and ICBC's contribution is captured via Project ID#96396. The purpose of the project is to construct a 3.5 million tons-per-annum (mtpa) integrated steel plant — that operates a blast furnace (BF) and basic oxygen furnace (BOF) — in Morowali Industrial Park (IMIP) in Central Sulawesi. The first blast furnace was put into operation on March 30, 2020. The second blast furnace was scheduled to be put into operation in May 2020, but due to the Covid-19 pandemic it was ultimately put into operation on February 3, 2021. With the second blast furnace running, PT Dexin Steel Indonesia has an overall crude steel production capacity of 3.5 million mt/year, feeding re-rolling lines for rebar and wire rod with capacities of 1 million mt/year and 500,000 mt/year, respectively. Also, with the second blast furnace online, the steelmaker boasts production of products such as slab, billet, rebar, and wire rod. The third blast furnace was originally scheduled to be put into operation in December 2022. Once it is running, the steel plant will boost its total output capacity to 6 million mt/year.

Additional details

1. As of 2023, Delong Steel Singapore Projects, a subsidiary of Chinese steelmaker Delong Holdings, has a 60% stake in the venture and Hanwa 10%, a Dexin Steel source said. The rest is owned by Shanghai Decent Investment and IMIP in unknown quantities. See: https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/metals/020521-dexin-steel-indonesia-fires-up-second-blast-furnace-at-morowali. Some sources claim that PT Dexin Steel Indonesia is a joint venture of Delong Steel Ltd (65% ownership stake), Tsingshan Group (25% ownership stake) and Hanwa Group (10% ownership stake). Hanwa Group is a Japanese company. 2. The Chinese project title is 青山德龙印尼德信项目 or 印尼德信钢铁一期350万吨项目 or 德信钢铁在印尼投资的350万吨钢铁冶炼加工项目. 3. China Minsheng Bank is a private bank. 4. More research is needed to determine how Phase 3 (the third blast furnace) was financed. 5. One of the companies reportedly providing a corporate repayment guarantee - Fujian Tsingtuo Nickel Industry Co. Ltd. (福建青拓镍业有限公司) - is a subsidiary of the Tsingshan Holding Group (青山控股集團有限公司 or 青山控股), either directly or indirectly via Shanghai Decent Investment Group Co Ltd. or Tsingtuo Group. 6. It is possible that that the two entities that provided corporate repayment guarantees provided a 72.22% guarantee to the first loan facility (tranche) and a 27.78% guarantee to the second loan facility (tranche) - instead of Delong Steel guaranteeing 72.22% of both tranches and Fujian Tsingtuo Nickel Industry Co. Ltd. guaranteeing 27.78% of both tranches. This issue warrants further investigation.

Number of official sources

5

Number of total sources

14