POSCO will begin work on its first magnesium smelting plant on Friday.

The plant, to be located within an industrial complex in Gangneung, Gangwon Province, is scheduled for completion in June 2012.

Once complete, the plant will be capable of producing 10,000 metric tons of magnesium ingots on an annual basis, reducing imports by an estimated 35 billion won ($32 million) each year.

According to industry data, all of the 20,000 tons of magnesium ingots used by local industries last year were imported from China.

The area the industrial complex is located in, Okgye-myeon, is estimated to hold more than 200 million metric tons of dolomite deposits, making it a strategic location for establishing magnesium production and processing. Dolomite, calcium magnesium carbonate, is a key source of magnesium in commercial production of the metal.

“The project is part of the company’s drive to become a comprehensive materials producer,” a POSCO official said. Since Chung Joon-yang took office as its chief executive in 2009, POSCO has been pushing to diversify its revenue sources to include a range of metals without iron to become a “comprehensive materials producer.”

With magnesium alloys gaining increasing attention as alternatives to steel products used in automobiles and aircraft due to their properties such as lightness and high strength-to-mass ratio, POSCO has been pushing its magnesium-related businesses as a key part of its iron-free metals portfolio.

In 2009, the company completed a plant capable of producing 3,000 tons of magnesium plates in Suncheon, South Jeolla Province.

As part of the plans for becoming a comprehensive materials producer, the company has also been pushing resource development projects. POSCO’s resource development projects include the nickel mining firm NMC in New Caledonia, which holds the world’s largest nickel deposits, and a project conducted with the Ministry of Land, Transport and Maritime Affairs to develop technologies for extracting lithium from seawater.

By Choi He-suk  (cheesuk@heraldcorp.com)