Bhubaneswar, March 25 (IANS): Mideast Integrated Steel Limited (Mesco Steel), the flagship company of Mesco Group, has signed a Memorandum of Agreement (MOA) with South Korean steel maker Posco to use finex technology at its Kalinganagar plant in Odisha, an official said on Wednesday.

This will help the Mesco steel venture from producing pig iron into steel-making and give Posco its first local partner. "The agreement signed with Posco to relocate the number 1 Finex unit of the company from Pohang to MISL's steel plant in Kalinganagar," said a Mesco steel release.

While the joint venture will have Posco taking up a minority share, the definitive agreements will be signed within the next quarter and pre-engineering work to dismantle the plant at Pohang shall start in the next quarter, said the release. "There is no decision on share-holding capacity between the two companies yet. We shall come up with a decision soon," Mesco managing director Rita Singh told IANS.

This project is part of the $700 million first phase steel expansion project to take Mesco Steel's capacity to two million tonnes. Presently, Mesco Steel operates two blast furnaces in its plant at Kalinganagar. It operates an iron ore mine in Barbil region of Keonjhar district and has another iron ore mining lease at Malangtoli in Odisha, said the release.

The company expects that it would produce steel using Finex technology, which allows production of molten iron directly using iron ore fines and non-coking coal and are cheaper to build and operate than the traditional blast furnace.

Partnering with Posco would help Mesco steel produce steel at a lower cost because Finex technology uses iron ore fines, which is being exported due to lack of demand in India and also because normal coal is abundantly available in the state.