Sept. 20 (Bloomberg) -- Posco, Asia's third-largest steelmaker, won an order to build India's biggest blast furnace, its first project in the nation since announcing a $12 billion iron and steel venture.

The $350 million furnace for Steel Authority of India Ltd., the nation's biggest state-run steelmaker, will be completed by March 2010, Posco Engineering & Construction Co., a unit of Pohang, South Korea-based Posco, said in an e-mailed statement today.

Posco and ArcelorMittal are among international steelmakers increasing capacity at mills in India, where use of the metal is forecast to rise 16 percent a year until 2012, or twice as fast as in the past five years, Credit Suisse Group said in July.

The 4,060 million cubic-meter furnace will be built 70 kilometers (45 miles) north of Kolkata and have the capacity to produce 2.7 million metric tons of steel a year, Posco Engineering said in the statement from Seoul. Steel Authority makes 14 million tons a year of steel, or about 30 percent of India's total output.

Posco last month received environmental approval from India's government to set up a plant in the eastern state of Orissa, more than two years after agreeing to invest $12 billion in the venture.

The Korean company later signed an initial agreement with Steel Authority to cooperate on developing and purchasing raw materials and sharing sales networks in the South Asian nation. India's government owns 85.84 percent of Steel Authority.

Construction of Posco's 12 million ton plant has been delayed as it is yet to receive a mining license and the land has yet to be fully cleared of occupants. It also agreed last month to share infrastructure and technology with Steel Authority.

Shares of Steel Authority of India extended its two-day gain and rose as much as 10.35 rupees, or 5.6 percent, to 194.1 rupees. It traded at 193 rupees at 10:43 a.m. in Mumbai.

Posco Engineering said last month it plans to sell shares in an initial public offering on the Korean Exchange in the first half of next year.

To contact the reporter on this story: Kyunghee Park in Hong Kong kpark3@bloomberg.net; Debarati Roy in Mumbai at droy5@bloomberg.net.

Last Updated: September 20, 2007 02:09 EDT