If POSCO’s India Project is, Indeed, Dead, What’s Next for the Steel Manufacturer?

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In part one of the POSCO report, Sohrab Darabshaw examined the history of the troubled steel production project originally approved in 2005 for India’s Odisha state. Here, he examines the fallout and what POSCO’s next move might be if the project is, indeed, dead.

South Korean steel manufacturer POSCO’s plans for a steel facility in the Indian state of Odisha may be dead. It’s been 11 years since the plan was initially approved.

Public comments of Jual Oram, India’s Tribal Minister in the new BJP government, have made the anti-POSCO camp in the state of Odisha jubilant. The Odisha government might be in favor of giving permission for the mining operation, but murmurs of corruption raised by some of its own elected representatives occasionally surface in the local media.

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The tribes that are going to be directly affected by the POSCO plant and its mines are now alleging that despite giving up their land for the project, the promised compensation package never got to them.

A report in the Global Times quoting a tribal leader said the locals had given up land for the POSCO project, believing the government’s assurance of a proper rehabilitation package including employment to at least one member from each tribal family, but five years later, nothing has happened. Nothing.

The six-point charter of demands included assured employment to each land-losing family, separate and enhanced prices for homes, homesteads and agricultural land, monthly allowances for landless laborers engaged in agriculture and betel vines, among other assurances. The tribals have now vowed not to allow POSCO to start any work on the acquired land until their demands are fulfilled.

POSCO’s Troubles
While the placation of the local populace may still be in the hands of the provincial government, the statement by the Tribal Minister may be a cause of worry for POSCO officials.

It’s been more than a decade since this project was envisaged and with barely a few steps forward such as getting environmental clearance and part-acquisition of the land for the project, POSCO seems to be caught in a bind. Once upon a time, the South Korean steel manufacturer had gone on record to boast that its Indian plant would be the company’s flagship. That dream has almost turned sour.

In fact, last year, as reported by MetalMiner, POSCO decided to pull out of a proposed plant to be set up in India’s southern State of Karnataka to hedge its bets against the slow-moving Odisha project.

Doing so, POSCO India Chairman Yong Won Yoon said at the time, “…the given market conditions and significant delay in acquiring the required land…. We have decided to close the proposed 6 mtpa steel plant in Karnataka.”

A beleaguered POSCO is currently undergoing a business revamp. Moody’s, the international credit rating agency downgraded POSCO’s foreign currency bond rating and senior unsecured shelf rating to Baa2 from Baa1 late last year, citing huge debt and uncertainties within the industry.

POSCO Chairman Kwon Oh-joon was recently quoted in the Korea Times as saying the steelmaker was engaged in a business restructuring to bolster its fiscal soundness and global competitiveness.

According to him, the steelmaker would be concentrating on three core areas ― steelmaking, renewable energy (fuel cells and clean coal) and materials (lithium and nickel), and would scale back its non-core segments. In addition, this marked an end to the company’s expansion-oriented policy, implemented by Kwon’s predecessor Chung Joon-yang who retired two months ago.

Further, a positive ruling by the US Commerce Department on anti-dumping allegations of Grain Oriented Electrical Steel (GOES) imports by companies from seven nations including by South Korea and POSCO, has only added to the company’s collection of woes.

The International Trade Administration had issued preliminary dumping margins – from a high of 241.91 percent on Germany’s ThyssenKrupp Electrical Steel GmbH to 5.4 percent by South Korean POSCO.

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