The Posco-Mesco Finex Steel Plant Deal: Will It Happen?

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Someone rightly said that anything with the word Posco in it truly makes news in India.

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For the last couple of days, Indian newspapers are full of reports surrounding the hush, hush Mesco Steel-Posco Memorandum of Understanding (MoU) wherein the latter will set up a 0.6 metric tons per annum (mtpa) steel plant (Finex furnace) on the former’s property.

What set the grapevine buzzing was the manner in which the plant is proposed to be set up. A report in LiveMint said if things go according to plan, Posco will dismantle the 600,000-ton Finex technology steel plant back at its headquarters in South Korea, ship it to Odisha, and put it up in Mesco’s plant site there.

The report quoted Posco India spokesperson I.G. Lee as saying the MoU was to conduct a cooperative study on the possibility of business collaboration, and that it was too early to speak about details like the setup date of the new plant and shareholding structure.

All Depends on the Study
Posco’s Finex technology does not require coking coal to make steel. The patented technology, instead, uses low-grade fines. Indian steelmakers currently import coking coal due to lack of supply within the country. A question mark thus hangs over whether the South Korean steel major will be willing to share this technology, developed with government support, with others here and earn a royalty, or keep the stealth technology close to its chest for themselves.

If Posco is successful in setting up this plant in India – which going by its past track record looks like a BIG if – it would be able to start manufacturing locally and integrate the stealth technology with its processing plants around India.

India’s Mesco Steel and produces pig iron and has some iron mines in Odisha. The company is looking to grow its 1.2 million-ton steel capacity in Odisha, and if the deal with the South Korean partner comes through, it will help it acquire a modern technology plant. Posco has been waiting for almost a decade now to get its approximate $12 billion (Rs 51,000 crore) steel megaplant off the drawing board. The Odisha plant has been mired in protests over land acquisition by locals, green activists, litigation and lack of approvals.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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