By Lee Hyo-sik
POSCO has shelved its plan to build a steel mill in Eastern India because it cannot finance large-scale overseas projects due to its deteriorating financial health.
The decision is part of the steelmaker's full-scale restructuring scheme, unveiled last week by Chairman Kwon Oh-joon, who seeks to scrap its unprofitable businesses abroad. The continued global supply glut has also made the world's fourth-largest steelmaker reluctant to spend $12 billion to construct a 4-million-ton capacity steel mill in India's Orissa State.
"The company is not in a position at the moment to finance large-scale overseas investment schemes," a POSCO spokesman said, indicating that it will not push ahead with the Orissa project at least for the time being.
"But this doesn't mean that we have completely given up building a steel mill in Eastern India," the spokesman said. "When the conditions are right, we will definitely restart the project. For now, we will focus on producing automotive steel plates and other value-added goods for automakers and other manufacturers operating in India."
In 2005, POSCO signed a contract with the Orissa State government for the construction of the envisioned factory.
Under the agreement, POSCO secured rights to develop iron ore mines near the site in which it plans to build a plant. But it hasn't been able to even break ground due to opposition from environment groups and residents. India's bureaucratic red tape is also said to have stalled the Orissa project.
Against such a backdrop, POSCO seems to have come to the conclusion that it would be better not to go forward with the plan at a time when its financial soundness has deteriorated on falling global demand and intensifying competition.
Instead of creating a large steel mill, the steelmaker has decided to build more processing facilities to produce automotive steel plates and other high value-added steel products.
It operates three processing plants in Western India, producing automotive and electrical steel sheets.
In January, POSCO opened its third plant in Maharashtra Province, about 120 kilometers from Mumbai. The facility is capable of producing 1.8 million tons of automotive steel plates annually for General Motors and other global automakers operating factories nearby.
In 2012, the company opened its first Indian plant capable of producing 450,000 tons of galvanized steel plates annually, and a second -- with an annual capacity of 300,000 tons of electrical steel sheets -- in 2013. Both plants are located in Maharashtra Province. POSCO plans to open another steel processing plant in early 2015.
On July 15 when announcing restructuring measures to turn POSCO into a more profit-oriented and efficiently run entity, Chairman Kwon said the steelmaker will build more processing facilities rather than large-scale mills equipped with furnaces in India and other countries.
The steelmaker has brought hot-rolled steel sheets from its Korean and Indonesian plants to its processing factories in India, which churn out what automakers and other manufacturers need.
The move is designed to improve its worsening bottom line by avoiding competition with Chinese steel firms that have flooded the global market with cheap, low-tech steel plates.
POSCO has shelved its plan to build a steel mill in Eastern India because it cannot finance large-scale overseas projects due to its deteriorating financial health.
The decision is part of the steelmaker's full-scale restructuring scheme, unveiled last week by Chairman Kwon Oh-joon, who seeks to scrap its unprofitable businesses abroad. The continued global supply glut has also made the world's fourth-largest steelmaker reluctant to spend $12 billion to construct a 4-million-ton capacity steel mill in India's Orissa State.
"The company is not in a position at the moment to finance large-scale overseas investment schemes," a POSCO spokesman said, indicating that it will not push ahead with the Orissa project at least for the time being.
"But this doesn't mean that we have completely given up building a steel mill in Eastern India," the spokesman said. "When the conditions are right, we will definitely restart the project. For now, we will focus on producing automotive steel plates and other value-added goods for automakers and other manufacturers operating in India."
In 2005, POSCO signed a contract with the Orissa State government for the construction of the envisioned factory.
Under the agreement, POSCO secured rights to develop iron ore mines near the site in which it plans to build a plant. But it hasn't been able to even break ground due to opposition from environment groups and residents. India's bureaucratic red tape is also said to have stalled the Orissa project.
Against such a backdrop, POSCO seems to have come to the conclusion that it would be better not to go forward with the plan at a time when its financial soundness has deteriorated on falling global demand and intensifying competition.
Instead of creating a large steel mill, the steelmaker has decided to build more processing facilities to produce automotive steel plates and other high value-added steel products.
It operates three processing plants in Western India, producing automotive and electrical steel sheets.
In January, POSCO opened its third plant in Maharashtra Province, about 120 kilometers from Mumbai. The facility is capable of producing 1.8 million tons of automotive steel plates annually for General Motors and other global automakers operating factories nearby.
In 2012, the company opened its first Indian plant capable of producing 450,000 tons of galvanized steel plates annually, and a second -- with an annual capacity of 300,000 tons of electrical steel sheets -- in 2013. Both plants are located in Maharashtra Province. POSCO plans to open another steel processing plant in early 2015.
On July 15 when announcing restructuring measures to turn POSCO into a more profit-oriented and efficiently run entity, Chairman Kwon said the steelmaker will build more processing facilities rather than large-scale mills equipped with furnaces in India and other countries.
The steelmaker has brought hot-rolled steel sheets from its Korean and Indonesian plants to its processing factories in India, which churn out what automakers and other manufacturers need.
The move is designed to improve its worsening bottom line by avoiding competition with Chinese steel firms that have flooded the global market with cheap, low-tech steel plates.
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