Seoul: India’s decision on Monday to approve Posco’s $12 billion steel plant will help the world’s No. 3 steelmaker move toward its strategy of raising exports and gaining access to low-cost iron ore.
The No.3 global steelmaker’s 12-million-tonne steel project, first announced in 2005, is the centerpiece of Posco’s bid to expand overseas, amid rising competition at home and as it seeks more self-sufficiency in supplying steelmaking ingredients.
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Its domestic rival, Hyundai Steel, is boosting output aggressively to increase supply for its affiliate Hyundai Motor, the world’s No.5 auto group and a major client of Posco.
Approval would enable the Orissa government to immediately start acquiring land for Posco.
“The decision will help us proceed with the stalled project, as it will allow us to resume land acquisitions among other things,” a Posco spokesman said.
But Posco still has a long way to go to complete the Orissa project, since it has yet to receive a separate court ruling on iron ore mining rights from India. Posco expects that to be decided by early 2012 in order for construction to start later that year.
An Indian firm, which also bid for the mining concession, filed a lawsuit against the Orissa government, contesting its decision to grant a concession to the South Koreans.
The project has been delayed by environmental issues and protests by local residents who say the plant will disrupt their largely agricultural and forest-based livelihoods.
Steel companies are rushing to invest in India to tap the country’s rich iron ore deposits, the world’s third largest, and strong steel demand growth, but have faced a series of obstacles such as land acquisition problems, environmental clearance and regulatory issues.
ArcelorMittal, the world’s biggest steelmaker, has announced plans to set up plants in India but so far has not been able to acquire land.
Posco is among several corporations, including Vedanta Resources, which have come under scrutiny from the environment ministry, putting the department in conflict with others in the government who are pushing for rapid industrialisation.
In October, Ramesh threw out plans by London-listed Vedanta to expand its alumina refinery over environmental concerns, but this week Ramesh said he was willing to conditionally reconsider Vedanta’s expansion plan.
Ramesh has also said Posco’s project was “fundamentally different” from Vedanta’s plans.
A number of overseas steelmakers are eyeing a footprint in India’s high-growth market at a time when global steel demand is expected to slow as mature economies struggle to recover from the global economic downturn.
Demand for steel in India is expected to rise by 14% this year, outpacing the world’s 5.3% growth, fuelled by surging construction of buildings and infrastructure and huge investments by global carmakers, according to the World Steel Association.