South Korea’s Posco says it will acquire an 8 per cent stake in the $1.6bn steel plant that is being developed by the local Pars Kohan Diarparsian Steel (PKP) at the Iranian port city of Chabahar.

The facility is being developed to capitalise on rising domestic demand.

Posco Engineering & Construction, Posco’s construction division, has plans to build a power plant as part of the scheme. The construction unit also plans to build desalination facilities to produce 60,000 tonnes of water a day.

Last year, Saudi Arabia’s Public Investment Fund (PIF) acquired a 38 per cent stake in Posco Engineering & Construction. Two top executives from Saudi Aramco and Acwa Power now represent the kingdom’s state-owned investment vehicle on the board of the South Korean company.

According to Posco’s research centre, South Korean steelmakers controlled more than half the Iranian market before sanctions were imposed.

Iran is the biggest producer of steel in the Middle East, and plans to more than triple its output to 55 million tonnes by 2025.