PKX's Orissa Project gets a Setback - Analyst Blog
21 Giugno 2011 - 1:15PM
Zacks
Korean steel producer,
POSCO’s (PKX) $12 billion (Rs 52,000 crore) steel
plant project at Orissa suffered a setback after the state
government stopped the land acquisition procedure indefinitely in
response to stiff opposition from the local communities.
It’s the sixth year since the steel
major signed a memorandum of understanding (MOU) with the Orissa
government in 2005 to build a 12 million ton annual capacity plant
in the eastern provinces of the state covering approximately 1,621
hectares of land.
The project since the very
beginning has fuelled agitation among the local people who are
protesting against land acquisitions and environmental issues.
However, in January this year, the project finally got the green
signal from the Environment ministry and received conditional
approval with 28 new conditions for the integrated steel plant and
32 fresh conditions for the captive port.
The indefinite halt
notwithstanding, the company is still optimistic about the project.
The POSCO project is the single largest foreign direct investment
(FDI) in India.
POSCO is the world’s third largest
steelmaker on the basis of output. The company, chiefly because of
its wide regional diversification with its growing presence in the
international markets through investments in Australia, China,
India, Indonesia and Brazil, can reap enormous benefits. The Orissa
project too has limitless possibilities, enabling POSCO to tap the
growing demand for steel globally. The company also gains from its
joint ventures, acquistions, and raw material independency.
In addition, higher proportion of
value-added products (such as cold-rolled steel, automotive steel
plates and electric steel sheets) in the company’s product mix is a
boost to revenue and earnings growth as these products attract
better realizations and margins over commodity hot-rolled
coils.
However, growth momentum in the
quarters ahead might get restricted due to headwinds emanating from
higher raw material cost and rival steel manufacturers worldwide,
including Arcelor Mittal (MT), Nippon Steel Corp.
(NISTY.PK) and Hyundai Steel Company.
We currently maintain a Neutral
recommendation on the stock.
ARCELOR MITTAL (MT): Free Stock Analysis Report
POSCO-ADR (PKX): Free Stock Analysis Report
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