Posco to push for $10 bn Orissa project

The massive project, part of the firm’s drive to expand production globally, includes building a 10 million tonne steel plant, a 30 million tonne iron ore mine, a hot strip mill for making hot rolled coil and a seaport in Orissa.

The project is more than triple the previous record direct investment in India — the $2.9 billion, Enron-backed Dabhol power plant.

‘‘We are still in talks with the Orissa state government and remain committed to the project, although it’s unclear when a preliminary agreement will be made,’’ a Posco spokesman said.

Indian media have reported that signing a MoU has been postponed because of slow decision making by the state government in providing infrastructure and differences over how much ore could be exported.

‘‘Differences over terms of iron ore mining are the main obstacles in the deal,’’ the spokesman said.

Steel demand in India, is rising as investment in infrastructure increases and demand for housing and durables such as cars and consumer goods soars.

Steel consumption in India is expected to more than triple to 100 million tonnes by 2020, having grown at a steady rate of about 5 to 6 per cent per year over the last decade.

Posco sells 75 per cent of its output at home, while more than a third of its exports are to China, which consumes a quarter of the world’s steel products. But demand from China is shrinking as it tries to cool its overheated economy, so steel makers are looking for new markets.

BHP Billiton, the world’s biggest miner, plans to take part in the Posco project but the company has said interest would be limited to the supply of raw steel-making materials and handling facilities.

Posco plans to start production by the end of 2009 and create 42,000 jobs.

Shares of Posco closed down 3.8 per cent at 190,000 won, lagging a 2.8 per cent drop in the broader market.