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25. January 2010

POSCO to expand India business

Korea Herald reported that, with the comprehensive economic partnership agreement between Korea and India taking effect as of January 1st 2010, Korea's major conglomerates are rushing to tap the fast growing Indian market, which boasts the world's fourth largest purchasing power.

On the back of Korean President Mr Lee Myung bak's explicit support for Korean steelmakers, automakers and electronics companies in India, POSCO's USD 12 billion project to build an integrated mill in Orissa is expected to gain stronger momentum this year,.

POSCO has been seeking to build an integrated mill in Orissa since 2005. It established its Indian affiliate POSCO India in August 2005 and applied for mining rights, also known as prospecting licenses, in three mines in September 2005.

For the past three years and six months, the biggest hurdle to start construction of the integrated mill was getting the Indian government's approval to clear forest land for the steel plant. As of December 29th 2009, the hurdle was cleared as the Indian government finally approved POSCO to use 74% of the planned site for the mill for industrial use, allowing the steelmaker to build the plant in earnest.

POSCO officials said that it took a longer time than expected to get the approval because of India's deep rooted agricultural traditions and red tape. POSCO India plans to negotiate with villagers who live in the rest of the site to move their homes and start building the plant within this year.

The integrated mill project has accelerated especially since September 2009, when POSCO CEO Mr Chung Joon yang met with India's Prime Minister Dr Manmohan Singh in person to request the Indian government's cooperation.

According to POSCO, the integrated mill will be constructed in a multiple phase, with the initial capacity of 4 million tonnes a year. When fully completed, the mill's annual capacity of steel production will reach 12 million tonnes, which is about one third of POSCO's current annual output. POSCO produced 33.1 million tonnes of crude steel in 2008.

Another of the steelmaker's ambitious projects this year is to build an automatic steel plant, also known as a continuous galvanizing line in Maharashtra, in the western part of India, to supply automobile steel products for India's local automakers. POSCO plans to start building the auto steel plant in September in the India's hub of auto industry, and it will annually produce 320,000 tonnes of steel for automakers and 130,000 tons for electronics parts, respectively.

The planned integrated mill and the auto steel plant are expected to create synergy with POSCO's four other steel processing centers in India, as POSCO aims to enhance its status as a quality auto sheet supplier within India.

POSCO in September broke ground for an auto steel processing center, POSCO ICPC, at the Renault Nissan Supplier Park in Chennai in India. The construction of the POSCO-ICPC will be completed in June 2010, with an annual output target of 120,000 tons of automobile sheets, according to the steelmaker.

The Chennai region in the southeastern part of India has been witnessing a growing demand for automobile steel processing as major automakers like Renault Nissan, Ford, M&M and HMI are expanding production lines in the region. POSCO is expected to provide its clients with various services including auto sheet supply and technology supports.

POSCO built the first and second mill of POSCO IPPC in Pune in December, 2006 and April, 2009, respectively, to process 250,000 tonnes of steel and provide processed steel according to clients' requirements. In December 2007, the company started operation of another processing center, the POSCO-IDPC, in Haryana, southwest of Delhi, to provide 120,000 tonnes of automobile steel a year.

According to data by the Korea Iron & Steel Association, Korea's steel exports to India grew by an average of 23.3% a year from 2001-2008. In 2008, India imported a total of 6.37 million tonnes of steel, of which 31% came from China, 17% from Korea and 11% from Japan.

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