POSCO, the South Korean steel giant under POSCO Holdings Inc., is considering opening an integrated steel mill in India in its second attempt in 18 years to meet growing demand for its automotive steel products in the world’s fifth-largest economy.
“Steel plate orders are pouring in as finished carmakers ramp up their car production [in India] under the country’s ‘Make in India’ initiative,” Han Tae-soo, head of POSCO India Chennai Corp. (ICPC), said in mid-August when The Korea Economic Daily visited the center. “We are extremely busy dealing with order requests from multiple customers.”
Maruti Suzuki India Ltd., India’s No. 1 car seller, recently joined other global automakers in using POSCO’s steel to produce cars in India.
POSCO’s other customers include Hyundai Motor Co., Kia Corp., Tata Motors Ltd., Mahindra and Mahindra Ltd., Honda Motor Co., Škoda Auto a.s., Volkswagen Group and Nissan Motor Co.
With the rise in customers, earnings from POSCO’s Indian operation have increased markedly in recent years.
POSCO Maharashtra Steel, the Korean steel maker’s rolling plant in India, reported $27 million in operating profit in the second quarter of this year and $12 million in the first quarter.
Total operating income for the first six months of this year has already surpassed last year’s total of $39 million, according to the company.
INTEGRATED STEEL MILL FOR 'MAKE IN INDIA'
Industry observers project POSCO’s Indian operation earnings to grow further as more car makers such as Tesla Inc. prepare to make inroads into India. Meanwhile, those with local operations already in the country, such as Hyundai Motor, are ramping up car output under the Make in India initiative.
Make in India is the Indian government’s drive to make the country a global manufacturing hub. Under the plan, foreign companies that produce their products in the South Asian country will enjoy incentives.
To meet the growing automotive steel demand, the Korean steel giant is said to be exploring an option to build an integrated steel plant in India. This comes some 18 years after its plan to build one in 2005 collapsed amid strong opposition from residents living near the proposed mill's candidate site, who were unhappy about the company’s compensation plan.
Under the Make in India initiative, POSCO is expected to be given more support than before from the Indian government, said an unnamed official from a Korean company with operations in India.
With an integrated steel plant in India, POSCO would be able to offer its steel to local customers at lower prices because commodities prices would be stabilized.
POSCO currently operates one rolling plant in India, POSCO Maharashtra Steel, where cold-rolled steel sheets for automobiles are produced with steel shipped in from Korea.
The plant’s production capacity is 1.8 million tons per year.
Those rolled steel sheets are delivered to POSCO’s steel processing centers in Ahmadabad, Pune, Delhi, Hyderabad and Chennai, near local car plants of various global finished automakers in India, where they're processed into customized steel products based on each customer’s requests.
Despite its unsuccessful earlier attempt to build an integrated steel mill, POSCO has remained committed to its business in India with amended business plans.
Over the nearly two decades since, India has emerged as an economic powerhouse, solidifying its position as the world’s fifth-largest economy as of 2022.
In the 2022-23 fiscal year Its economy grew 7.2%, and economic indicators suggest another strong expansion this year, according to S&P Global Market Intelligence.
