POSCO to Invest $1.4 Billion in Development, Construction and Operation of Hot-Rolled Steel Coil Production

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Researched by Industrial Info Resources (Sugar Land, Texas)--South Korean integrated steel producer POSCO (NYSE:PKX) (Pohang, South Korea) has announced details of the company's investment plans in its home country. The company is set to invest approximately $1.4 billion to increase production at its Gwangyang steelworks through the development, construction and operation of a new hot-rolled steel coil production line, the Gwangyang No. 4 hot rolling mill.

The increased investment is aimed at enhancing POSCO's domestic production capacity to serve the increased demand for high-quality steel products. The new line is expected to lead to a reduction in high-quality steel product imports from countries such as Japan.

The new production line will use slabs from the Gwangyang steelworks as its major input, following an increase in the steelmaking and casting facilities there, and the final output will consist of high-strength steel, steel oil pipes, wide strip steel and steel plates for use in the automobile sector.

Construction of the new production line is scheduled to begin in September next year. When completed in January 2014, the facility will have a production capacity of 3.3 million tons per year of hot-rolled products. The facility will increase POSCO's hot-rolled steel coil production capacity from the current 23.54 million tons per year to 26.84 million tons per year.

POSCO has been pursuing an aggressive expansion strategy. The company acquired 68.15% of Daewoo International Corporation (SEO:047050) in September this year in a move designed to expand its sales network and secure access to raw materials.

POSCO announced in July that it would buy a 24.5% stake in an Australian iron ore mine for $162 million, adding that it intended to spend up to $830 million in the purchase of mines to stabilize coal and iron ore supplies.

A $6 billion joint venture with Indonesian steel producer PT Krakatau Steel (JAK:KRAS) (Jakarta, Indonesia) to build a steel mill at Cilegon in Banten, Indonesia, was formalized in August this year, raising hopes by POSCO that it would lead the way to the acquisition of iron ore and coal mines in Indonesia.

A gradual recovery in the global economy is paving the way for growth in demand for steel. The World Steel Association (Brussels, Belgium) is expecting world steel demand to grow 13.1% in 2010 and 5.3% in 2011.

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