Reported by Sandeep Sahu
Bhubaneswar, July 26
Despite serious reservations expressed by many of its shareholders over its $12 billion steel plant near Paradip, global steel major Posco has announced that it would go ahead with the Odisha project.
The announcement comes days after the company announced its withdrawal from its proposed $ 5.3 billion steel plant project in Karnataka.
“We share the concerns expressed by shareholders about the overall market conditions. But it would take several years before the Odisha project goes on stream, by which time the markets may improve,” the Posco official said in Seoul.
A series of acquisitions as part of its global expansion programme has left Posco with a debt burden that has more than doubled over the past three years, while falling major markets such as China has hurt steel prices and margins.
Posco’s earnings are expected to slump by as much as 40% in quarter ending June, 2013 while its operating margin fell to a meagre 7.8% last year from a high of 27.2% in 2005, when it signed an MoU with the Odisha government for setting up the Paradip plant.
Posco’s total debt has more than doubled to 39.6 trillion Korean won ($35.39 billion) on a consolidated basis at the end of March 2013, from 18.2 trillion won at the start of 2010, according to its regulatory filings.
The first phase of the Paradip project, the largest foreign direct investment (FDI) investment in the country, was originally scheduled to be completed in 2010. But protests over land acquisition, litigation over environmental issues and uncertainty over iron ore supply have conspired to delay the project inordinately.