POSCO to buy Pakistani steelmaker shares

POSCO, the world’s fourth-largest steel producer, is seeking to beef up its presence in South Asia by acquiring shares in a Pakistani steel company.

The Korean steel giant said Tuesday it has clinched a deal with Al Tuwairqi Holding Co. of Saudi Arabia to buy a 15.34 percent stake in Tuwairqi Steel Mills Ltd. for $15 million.

The Pakistani steelmaker is working to build a production complex in Karachi, the country’s financial capital. TSML plans to begin commercial production in January with an annual capacity of 1.28 million metric tons of direct-reduced iron, POSCO said.

DRI, also known as sponge iron, is produced by using gases generated from natural gas or coal. Its iron-rich characteristic makes a high-efficient substitute for scrap metal in the electric arc furnace system.

POSCO aims high as the deal will enable the steel mill to rake in dividends and expand its business scope in the world’s sixth most populous country with more than 180 million.

“Pakistan’s steel industry has a high growth potential,” said Chung Joon-yang, chief executive.

“Through the contract, POSCO will gain a foothold in Pakistan and boost business opportunities for affiliates involving construction, engineering and information and technology and others.”

The Pohang-based company has been scaling up its business in South Asia as demand spirals in the emerging markets there, led by India.

POSCO estimates Pakistan’s steel demand at 12 million metric tons in 2020, up more than 70 percent from 7 million metric tons last year.

It is injecting about $12 billion into an iron ore mine and a project to establish an integrated steelworks in Orissa, eastern India. POSCO projects the new plant to be able to churn out 12 million metric tons of steel a year until 2020, and the mine to have an annual output of 20 million tons.

By Shin Hyon-hee (heeshin@heraldcorp.com)