Hyundai Steel Co said it has started construction on an integrated steel mill with an annual production capacity of 7 mln tons in Dangjin, southwest of Seoul.

Hyundai Steel said it will spend 5.24 trillion won ($5.5 billion) in building two blast furnaces by 2011, challenging POSCO's dominance in the domestic market. The furnaces, with an annual production capacity of 7 million metric tons, are expected to ease supply shortage at home as the nation imports about 10 million tons of steel per year.

The steelmaker - owned by Hyundai Automotive Group - plans to invest another 2.26 trillion won by 2015 to expand the Dangjin facility to reach an annual output of 12 million tons. The company currently makes up to 10.5 million tons of steel for general use from scrap metal at its electric furnace.

The auto giant invested heavily to normalize the Dangjin mill, previously owned by Hanbo Iron & Steel Co. which collapsed in 1997. The second hot-rolled coil plant in Dangjin, 150 kilometers south of Seoul, began commercial production earlier this month, two years after Hyundai bought the mill at auction in 2004.

The steelmaker has already secured a stable supply of raw materials from global mining giants for 10 years starting from 2010. It agreed to purchase up to 11 million tons of iron ore and 6 million tons of coking coal per year from Australia's BHP Billiton, Rio Tinto, Brazil's Companhia Vale de Rio Doce and Canada's Elk Valley Coal Corporation. The amounts account for 90 percent of what is required to produce 7 million tons of steel.

(The Korea Herald)