South Korea’s POSCO, Asia’s third-biggest steelmaker by output, scrapped a plan to build a mill in the southern Indian state of Karnataka because of delays in getting mining rights and purchasing land.
The South Korean steelmaker agreed with the Indian state to pull out of the project, the Pohang-based company said in a regulatory filing yesterday.
Both parties signed an initial agreement for the 323 billion rupee (US$5.44 billion) integrated mill project in June 2010.
The decision came at a time when steelmakers globally are suffering from falling profitability amid the economic slowdown. POSCO, South Korea’s biggest steelmaker, in April reported a worse-than-estimated profit for the first quarter as slow demand depressed prices. Second-quarter earnings are due on Thursday next week.
Separately, the South Korean company’s proposed US$12 billion project in the eastern state of Orissa has also been delayed by eight years because farmers had refused to vacate government-owned land they occupied for generations.
POSCO is waiting to hear from the state government, which has said it has completed land acquisition for the mill, POSCO’s India unit spokesman I.G. Lee said in a telephone interview from New Delhi yesterday.
In March, a bomb explosion in a village in Orissa state killed three people involved in protests against the project. The village has been the epicenter of protests since POSCO signed a pact with the state government in 2005 for the plant.
Local residents say the planned steel mill — touted as India’s biggest single foreign direct investment — would interfere with their traditional forest-based livelihoods and uproot them from their homes.
The Posco deal in Orissa state has been watched as a test case by foreign investors eager to enter India’s fast-growing economy, but wary of the potential for environmental and other concerns to derail their plans.
The company’s shares fell 1 percent to 310,000 won in Seoul trading at 2:29pm local time, compared with a 0.6 percent drop in the local benchmark KOSPI index. The stock has lost 11 percent this year, underperforming a 6.7 percent decline in the KOSPI.