By Kim Da-ye
POSCO announced Tuesday it acquired a stake in Pakistan’s only direct-reduced iron ― or sponge iron ― producer, gaining a footing in the country’s steel industry.
Korea’s largest steel maker will invest $15 million to obtain a 15.34-percent stake in Tuwairqi Steel Mills (TSML) located outside Karachi, Pakistan’s largest city.
“Pakistan is the sixth largest in terms of population, and the demand for steel is expected to increase from 7 million tons last year to 12 million tons in 2020,” POSCO Chairman Chung Joon-yang said.
“Through the investment, we would like to secure a bridgehead for expansion in Pakistan as well as more business opportunities for the POSCO family firms.”
Owned by Saudi Arabia’s Al Tuwairqi Holdings, TSML is Pakistan’s sole manufacturer of sponge iron from the direct reduction of iron ore.
Direct reduction is a low-cost iron production method suitable for developing countries. Iron produced this way can replace scrap metal for which Pakistan heavily depends on imports.
The South Asian country bordering India imports 3 million tons of scrap metal, and TSML has an annual production capacity of 1.28 million tons.
The construction of the TSML facilities is said to be 96-percent complete, and commercial production is scheduled to begin in January next year.
POSCO has recently been aggressive in expanding abroad and diversifying its product portfolio.
In July, it set up a joint business with Indonesia’s Krakatau Steel to build an integrated steel plant near Java.
Daewoo Securities analyst Jeon Seung-hoon commented back then that expansion into fast-emerging countries was the only alternative to sustain growth.
“Companies with high demand for steel are building their plants abroad, and it could reduce the growth in consumption,” Jeon said.
“Building steel plants in countries that can repeat the history of Korea’s economic growth could secure steelmakers’ long-term futures.”
A month earlier, the firm signed an agreement with Russian mining and metals company Mechel OAO to set up stainless steel plants as well as support facilities at the Elga coalfield in Siberia.
In May, it struck a preliminary deal with Li3 Energy, a Peruvian owner of a lithium-rich salt lake in Chile.