POSCO to pull out of $5.3 billion steel mill in Karnataka
SEOUL (Reuters) - South Korea's POSCO said on Tuesday it will pull out of a $5.3 billion steel mill development in Karnataka, but will proceed with another $12 billion project billed as the India's largest foreign direct investment.
POSCO said in a regulatory filing that it had agreed to cancel the project with the government of Karnataka because of delays in receiving iron ore mining rights and opposition from residents which had held back land acquisition.
The move could provide fresh impetus to POSCO's main steel project in Odisha. Already eight years in the making, it has recently gained momentum with the clearing of legal obstacles to the granting of an iron ore exploration licence.
"We will proceed with a steel mill project in Odisha, which is making progress. The latest move will make us more focused on the project," POSCO spokeswoman Kim Ji-young said.
POSCO, the world's fifth-biggest steelmaker, had pursued three steel mills in India as a way of hedging its bets on the slow-moving Odisha project.
In 2010, POSCO signed a preliminary agreement with the Karnataka state government to construct a mill capable of producing 6 million tonnes of steel a year. A year earlier it signed a separate steel mill deal with state-run Steel Authority of India Ltd (SAIL).
The POSCO spokeswoman said the talks with SAIL had "stalled". An Indian steel ministry official who sits on SAIL's board told Reuters the project was "as good as dead" as the federal government would not heed POSCO's demand for a controlling stake.
Will Byun, an analyst at Woori Investment & Securities, said the Odisha project was the only one of POSCO's Indian ventures that was "gaining steam".
"But overseas projects are not easy to do, and it is unlikely that the Odisha steel mill will break ground soon," he said.
He said POSCO had not completed land acquisition and was likely to take up to a year to gain iron ore mining rights.
POSCO has been struggling to gain a foothold in India and tap into the country's iron ore reserves and customer base. The company is trying to expand overseas to offset competition from smaller rival Hyundai Steel Co backed by automaker Hyundai Motor Co.
POSCO shares ended down 0.8 percent in line with the wider market's 0.5 percent fall.
"Expectations for POSCO's India projects have already been lowered," said Choi Moon-sun, an analyst at Korea Investment & Securities.
"POSCO needs to make investments in an effective manner ... It is not easy for POSCO to pursue both of the two projects in India," he said.
Backed by billionaire investor Warren Buffett, POSCO is grappling with a prolonged steel market slump caused by the weak global economy, especially in China. It posted only a small profit recovery from January to March.
(Additional reporting by Krishna N Das in NEW DELHI; Editing by Stephen Coates and Miral Fahmy)
- Tweet this
- Share this
- Digg this
- Maker of U.S. highway guardrails stops shipments over safety concerns
- São Paulo running out of water as rain-making Amazon vanishes
- Woman isolated in NJ under Ebola rules tests negative
- Google's Pichai to oversee major products and services
- India picks Israel's Spike anti-tank missile over U.S. Javelin - source
Finance Minister Arun Jaitley favours a cut in interest rates to trigger demand in the construction sector, a newspaper report said on Saturday, but the Reserve Bank of India (RBI) has signalled it will not ease policy until it is confident of lower inflation. Full Article
Euro zone risks "relapse into recession" without structural reforms - Draghi. Full Article
Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw” Full Article