Chinese steelmaker Delong Holdings said it has signed a letter of intent to lift the annual capacity of its steel project in Indonesia to 20 million tonnes - more than three times the volume the Southeast Asian country produced last year.

Mineral-rich Indonesia has attracted billions of dollars of investment from top metals consumer China as it looks to position itself as a hub for steel and battery materials production.

Delong, through its Indonesian joint venture (JV) Dexin Steel Indonesia, started investing in its steel project on the island of Sulawesi in 2018 and saw the mill reach designed output in June this year. Its JV partners are Shanghai Decent Investment Group and Indonesia Morowali Industrial Park.

Dexin Steel said on Sunday it had now launched a first-phase expansion of the project, raising annual capacity to 6 million tonnes, which is slated to be put into production by the end of 2021.

"With the help from Indonesian government and related policies, Delong ... will gradually expand the project's annual capacity to 20 million tonnes," it said in a statement.

Delong Holdings and Dexin Steel agreed with Indonesia's Coordinating Minister for Maritime and Investment Affairs, Luhut Pandjaitan, in China's Yunnan province in early October to further expand the project, according to the statement, which did not put a value on the extra investment.

Pandjaitan's spokesman said earlier this month that Chinese firms operating in Indonesia, including Delong Holdings, "made a commitment" to increase their collective investment in the country to around $20.9 billion by 2024.

Indonesia churned out 6.4 million tonnes of crude steel in 2019, according to the World Steel Association, making it the 26th biggest producer globally.

(Reporting by Min Zhang and Tom Daly; Editing by Mark Potter) ((min.zhang@thomsonreuters.com; (8610) 5669-2105;))