South Korean steelmaker POSCO said ay that it has signed an initial agreement to help build a $1.6 billion steel mill in Iran, looking to tap rising demand in the Middle Eastern country as other markets falter.
The lifting of economic sanctions earlier this year on Iran's disputed nuclear program is expected to revive the biggest steel market in the Middle East at a time when appetite in major consumer China is slowing.
POSCO and its affiliates plan to take 8 percent of the project to build the 1.6 million-ton steel plant with Iran's Pars Kohan Diarparsian Steel (PKP) in the port city of Chabahar, POSCO said in a statement.
The world's sixth-biggest steel producer aims to break ground on the plant next year, with a plan to add facilities producing cold-rolled and galvanized steel in 2019, a POSCO spokesman said.
Iran aims to more than triple its steel output to 55 million tons by 2025, hoping to reduce its imports of steel products such as auto sheets.
South Korean steelmakers controlled over half the Iranian market before the Western sanctions were imposed, according to POSCO's research center.
As part of the deal, POSCO plans to transfer to Iran its so-called FINEX technology, which it touts as being more environmentally-friendly and cost-efficient than standard steelmaking methods.
POSCO's construction unit, POSCO Engineering & Construction, also plans to build a plant to generate power as part of the project, using gas created by the steel factory.
The construction unit also expects to construct desalination facilities to produce 60,000 tons of water a day.