Posco may invest $200 million in Vietnam plant on Thainox delay

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Posco, Asia's biggest stainless-steel maker, will likely bring forward a $200 million expansion of a Vietnam plant after talks to acquire Thailand's Thainox Stainless Pcl stalled.

The South-Korean steelmaker may boost capacity at the Vietnam plant, acquired last year, by 200,000 metric tons from 85,000 tons, Suh Young Sea, senior vice president for stainless- steel marketing, said in an interview. "Southeast Asia is very important strategically," he said.

Southeast Asia is the world's biggest net importing steel market with demand expected to grow 9.2 percent a year, according to the research arm of the Korean mill. Chief Executive Officer Chung Joon Yang, planning a record $8.2 billion in capital spending this year, said Jan. 14 he wanted to complete talks to buy Thainox by the end of January.

"Stainless steel demand in the Southeast Asian market will increase this year," Suh said Tuesday in his office in Seoul. "It is highly likely that we're going to make the alternative investment" in Vietnam because of prolonged talks with Thaniox, he said, without elaborating on the delay.

The Korean mill was preparing to make an offer for the 85 percent of shares it doesn't own in Thainox at 2.10 baht to 2.20 baht a share, the Bangkok Post said Oct. 14, citing an unidentified person.

Southeast Asia

"Our main target markets are Thailand, Singapore, Malaysia, Vietnam, the Philippines and some Middle East countries such as Turkey," Suh said.

Stainless steel production may climb as much as 15 percent to 29 million tons in 2010 from 25.2 million tons last year, London-based research group CRU estimated. Global output may rebound this year to the 2007 level last seen before the global recession, the Bureau of International Recycling said last month.

"We had a good start this year," Suh said. "We expect stainless steel demand and prices to turn to an upward trend after March and actually we're seeing more of those signs."

Posco is monitoring the market before deciding on April prices, Suh said. Posco would need to raise prices "if only" recent gains in raw materials are taken into account, he said.

The steelmaker increased stainless steel prices in March for a second month because of gains in the costs of nickel, used to make the alloy.

Posco is the world's third-biggest and Asia's biggest stainless-steel maker by 2008 output, company spokeswoman Choi Youn Joung said Feb. 9. Stainless-steel companies are the world's biggest users of nickel.

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