Posco Teams Up with SAIL to Build $3.3 Billion Steel Mill

Industrial Info Resources (Sugar Land, TX) reports that Pohang Iron and Steel Company (Posco; Kyongsahngbuk-Do, South Korea) has teamed up with Steel Authority of India Limited (SAIL; New Delhi) to build a $3.3 billion steel mill in the city of Bokaro, in Jharkhand. Under the new joint venture with SAIL, a steel plant with an initial capacity of 500,000 tons per year will be established at Bokaro. The capacity of the new mill is likely to be ramped up to 4 million tons per year.

The plant will employ Posco's patented FINEX technology, which processes iron ore fines resulting from larger ore chunks, using low-quality coal to manufacture high-grade steel. The technology, which is not available locally, is reported to reduce production costs by 10 percent to 15 percent as compared to conventional technologies. The high-grade steel produced at the plant will be consumed by SAIL for making specialized steel products.

SAIL will provide the necessary land for the venture, and the investment and technology will come from Posco. Of SAIL's 34,000 acre plot, the plant operations require about 14,000 acres, leaving the remaining land usable for the joint venture plant. SAIL's existing plant at Bokaro has a capacity of 4.5 million tons per year, with the primary output being flat steel, which is used mainly in consumer appliances and automotive sectors. As a part of its corporate strategy, SAIL plans to expand the capacity of the Bokaro plant to 7.5 million tons per year in a couple of years, and effectively increase overall production to 23 million tons per year at an estimated investment of $15.4 billion. SAIL's present steel output stands at 13 million tons per year.

Iron ore linkage for the proposed venture is likely to come from Chiria mines in Jharkhand, the largest in Asia. SAIL has been granted the rights to utilize up to 1 billion tons for its existing ventures, while another 1 billion tons have been earmarked for a greenfield 15 million-ton-per-year steel plant in the state. SAIL will have access to the entire reserve, if and when it chooses to implement the mega project, as envisaged earlier.

Posco has finally established its presence in India through this joint venture, which has been founded on the basis of the SAIL-Posco strategic mutual cooperation deal finalized in 2007. Posco will hold a 60-percent share in the venture, and SAIL will hold 40 percent. Posco has been waiting since 2005 for its 12 million-ton-per-year plant project in Orissa to take off. The venture has faced land acquisition problems and more recently iron-ore linkage issues. Meanwhile, the company has also initiated a $240 million galvanized steel plant in the state of Maharashtra.