POSCO Restructuring
POSCO signed an MOU with Mesco Steel last month to sell its FINEX 1 plant to the Indian steelmaker. Although the government has yet to give its approval, the process is expected to go smoothly because the deal relates to the construction of an integrated steel mill.
Mesco Steel is a company that was established in 1992, and its annual production capacity reaches 700,000 tons. The Odisha region, home to the factory, is where POSCO has been in pursuit of integrated steel mill construction since 2005.
POSCO’s decision to sell the plant has to do with the characteristics of the region. Odisha is a place very sensitive to environmental problems, and the locals and environmental organizations have demanded that manufacturers in the region adopt eco-friendly production techniques. The FINEX technique is characterized by much less exhaust gas emissions than blast furnaces as well as cost-saving effects.
POSCO is anticipating that the sale of FINEX will be a boon to its steel mill construction that has been delayed for close to 10 years due to opposition from the locals.
The Korean steelmaker developed the world’s first FINEX technique in 2002 after 10 years of investment and set up the FINEX 1 plant in the following year, with demo plant facilities having an annual capacity of 600,000 tons. The second (1.5 million tons) and third plants (two million tons) were put into operation in 2007 and January this year, respectively. Recently, POSCO decided to improve its financial structure by selling the first plant, which is estimated to be priced at approximately 70 billion won (US$67.8 million).
“The FINEX technique is a part of the national key technologies subject to tech leak prevention, and thus government approval has to come first for the sale,” POSCO explained, adding, “The negotiation with Mesco Steel is in its early stage now, and it remains unknown if and when the deal will actually be made.”