Posco, India reach pact on $12 B steel venture
By agencies   |   Tuesday, 14 June 2005, 19:30 IST
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NEW DELHI: Posco, the world's fifth-biggest steelmaker, will sign an agreement with India on June 22 for a steel and iron ore project in Orissa at an estimated investment of $12 billion, which would be the nation's biggest foreign direct investment. Orissa, which has almost 25 percent of India's iron ore deposits, has allowed Posco to export up to 30 percent of the iron ore annually from the 600 million ton mine the state plans to lease, Jeong Tae Hyun, a general manager at the South Korean steelmaker said. Orissa state government officials confirmed the date. Posco and BHP Billiton, the world's largest mining company, are seeking alternate iron ore and coal supplies after a global shortage of the raw materials sent prices to records. India, which has lagged China in attracting overseas companies, needs investments in mining to feed steelmakers and manufacturers as the economy expands at a 7 percent. Orissa in April stalled approval for the project because Posco wanted to export 40 percent of the mined ore. The state wants to limit ore exports to ensure there's enough of the raw material for Tata Steel Ltd., India's second biggest steelmaker, and at least 40 other companies in proposed investments in the state totaling $40 billion. Posco agreed to import a matching quantity of high-grade ore to improve the quality of the alloy and prevent a possible shortage of the raw material, Jeong said. Iron ore found in Orissa is high in alumina, which is smelted to make aluminum. Dubai Aluminium Ltd., the world's third-biggest aluminum maker, plans to build a smelter in Orissa, which has half of India's bauxite reserves. Posco has begun work to secure water supplies for the plant to be built in Paradip, one of India's 12 big ports. Posco will move the 730 households from the plant site to a new location. Construction work will begin in a year's time and production by June 2010, Jeong said. Posco and BHP said in August they may invest $8.4 billion in the Orissa project. In April, Posco raised the investment amount to $10 billion and said it may invest an additional $2 billion to develop roads, railways and build a port. The states of Jharkhand, Orissa and Chhattisgarh account for 70 percent of India's coal reserves and 55 percent of its iron ore, the Confederation of Indian Industry said in an April report.