South Korea's top steelmaker Posco said Wednesday that it will expand its stainless steel production capacity in Vietnam to meet growing demand in Southeast Asian markets.

The world's third-biggest steelmaker acquired in July last year Asia Stainless Corporation, a Vietnamese cold-rolled stainless steelmaker with a capacity of 30,000 mt/year. Over the past year, Posco has expanded the plant's capacity to 85,000 mt/year.

Posco plans to further boost the stainless steel plant's annual production capacity to 235,000 mt in 2013 and to 285,000 mt in 2014, the company said in a statement.

Last week the steelmaker opened its Vietnam Hocihmin Processing Center, and it plans to use the second unit at the facility as a processing and distribution center solely for stainless steel.

The decision was made at a time when Posco's bid to take over Thailand's Thainox Stainless remains stalemated.

Posco has been negotiating to acquire Thainox - which has a production capacity of 200,000 mt/year - but last month the South Korean company said it halted talks due to political instability in Thailand.

A Posco official said if the company fails to acquire the Thai steelmaker, it will further expand its business in Vietnam.

As part of this blueprint, Posco is also pushing for building a $500 mln electric arc furnace with a capacity of 1 mln mt/year in Vietnam's Phu My complex, where it opened last October a $528 mln cold-rolled steel mill with an annual production capacity of 1.2 mln mt.

The steelmaker is now waiting for formal approval from the Vietnamese government for the project. It takes about 3 years to build the plant that melts iron scrap or iron ore to turn them into hot-rolled steel sheets, the official said.

Posco has already won approval from the Vietnamese government to build a 3 mln mt/year hot-rolled steel plant and plans to build a 400,000 mt/year continuous galvanizing line as well. It also has plans for a $5 billion project to build an integrated steel mill in Vietnam with a capacity of 4 mln mt/year - the biggest of Posco's overseas projects.

Source: Platts