Posco displays a steely resolve

Posco last week broke ground on its second stainless steel plant in Vietnam.

The $130 million plant is invested by Posco Vietnam Stainless Steel (Posco VST), a subsidiary of the Pohang-based Posco company, one of the world’s largest steel makers.

Located in the Nhon Trach 1 Industrial Park  in southern Dong Nai province, the plant will be capable of producing 150,000 tonnes of stainless steel a year and will help increase Posco VST’s overall capacity to 235,000 tonnes of stainless steel per annum.

The first Posco VST stainless steel plant, also located in the Nhon Trach 1 Industrial Park, is capable of producing 85,000 tonnes a year, up from 30,000 tonnes last year. The plant was originally built by the Vietnam’s Asia Stainless Corp., which was acquired by Posco VST in mid 2009. It was the first stainless steel plant in Vietnam.

The Posco VST’s second plant is projected to be commissioned in February 2012, producing mostly cold-rolled stainless steel plate and coil. It will make Posco VST become the biggest stainless steel manufacturer in Vietnam.

About a half of the plant’s output will be sold in the domestic market and the remainder exported to other countries in Asia, European Union and America.

The decision to raise its Vietnam-based manufacturing scale came after Posco stopped pursuing a plan to acquire the Thainox Stainless Plc, Southeast Asia’s largest stainless steel producer, by the middle of this year due to political instability in Thailand. According to Posco VST, the expansion in stainless steel manufacturing would help boost the company’s competitiveness and sale in the Vietnamese and Asian markets in the future.

Vietnam Steel Association (VSA) chairman Pham Chi Cuong said market for stainless steel producers remained huge as there were very few players in this segment in Vietnam so far.

“In 2009, the country’s steel demand was more than 11.7 million tonnes, a half of which was satisfied by local suppliers. The remaining half including steel plate, hot rolled steel, stainless steel and shape steel was imported from overseas because of the lack of local suppliers,” Cuong said.

Posco has forecasted that demand for steel in Vietnam would rise about 8.7 per cent per year until 2020.

In May 2010, Posco SS-Vina, another subsidiary of Posco, also received an investment licence for the building of a shape steel manufacturing plan in the Phu My 2 Industrial Park  in southern Ba Ria-Vung Tau province. The plant has an overall investment capital of more than $620 million and is capable to produce one million tonnes of steel per annum.

Posco is also operating another $1.1 billion cold and hot rolled steel plant in Ba Ria-Vung Tau.