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With expectations of rising steel prices tempering fears of Chinese competition, PT Krakatau Steel announced it was upsizing its October share sale to raise more capital for expansion.

“Krakatau has already decided to sell at least 40 percent of its shares,” Fazwar Bujang, president director of the state-owned company, said on Saturday. “We may even sell 45 percent, depending on our funding needs.”

The steel maker had initially planned to sell 30 percent of its equity to raise Rp 3.5 trillion ($381.5 million).

On Friday, the government gave the nation’s No. 1 steel maker its blessing to proceed with the IPO, despite worries about cheaper Chinese steel flooding the market after a trade deal slashed import tariffs to between zero and 5 percent.

“We will move forward and not retreat from our plan,” Fazwar said.

Krakatau plans to spend $600 million buying a blast furnace and additional facilities at its factory in Cilegon, West Java, with the money raised. The company said the investment would cut total production costs by about $50 to $60 per ton, although it declined to detail current production expenses. The new equipment is scheduled to come online in 2013.

The expansion is aimed at quadrupling Krakatau’s production capacity from 2.5 million tons per year to 10 million tons within five years.

Sahala Lumban Gaol, the deputy for strategic industries at the State Enterprise Ministry, said Krakatau had won approval for the IPO by convincing the government that China’s steel imports would not impact its sales or earnings.

“Krakatau said it was ready to compete with Chinese steel products, especially the high-end, as prices are competitive enough for them to be comparable,” Sahala said. “Krakatau expects rising steel price this year to boost its bottom-line, and it also has committed customers both nationally and internationally to support long-term sales cooperation.”

However, Fazwar was worried about low-end Chinese steel imports flooding the market and urged the government to step in. “China’s steel producers are getting support from their government, including export incentives and low-interest rate loans, while Indonesia’s government offers no such facilities,” he said.

Fazwar said Krakatau’s strategic partners, such as Japan’s Nippon Steel and South Korea’s Pohang Iron & Steel, would be welcome to participate in the IPO if they chose to buy pre-determined stakes.