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Under a memorandum signed on September 22, the two companies will set up a joint venture in Chongqing in south-western China that will utilise Finex technology – an iron making process originally developed by Posco, he said.

The technology allows the direct use of cheap iron ore fines and non-coking coal as feedstock.

In addition to having significantly lower operating costs and emissions than the blast furnace process, Finex dramatically reduces overall construction costs by eliminating the need for sinter and coke plants, according to Posco.

The two steelmakers will each hold a 50% stake in the proposed 3-million-tpy steel mill.

A formal contract will be signed by the end of next year once the governments of South Korea and China approve the joint venture, he said.