POSCO said it expects the joint venture to meet requirements needed for the planned initial public offering in 2013. Hong Kong and Chinese mainland listing regulations require companies to be profitable for three consecutive years before an IPO. POSCO didn't say how much it planned to raise.

The joined venture, China Zhangjiagang Pohang Stainless Steel (ZPSS), has recently increased its annual capacity to 1 million tonnes (including 600,000 tonnes of CR stainless steel processing capacity) from 800,000 tonnes, POSCO said in an e-mailed statement yesterday.

The latest capacity expansion at ZPSS brings POSCO's total stainless steel capacity to 3 million tonnes per year, making it the world's second-largest stainless steel maker on a par with China's Taiyuan Iron and Steel, POSCO said.

POSCO and ZPSS will jointly develop a nickel mine in Indonesia to secure the raw material for stainless steel production, it said.

82.5 percent of the joined venture owned by POSCO and 17.5 percent held by Shagang Group, China's leading private steel mill.

Stainless steel demand is set to grow 5 to 7 percent per year over the next five to 10 years, Shanghai-based Baoshan Iron and Steel Co said last week. Baosteel is China's second-largest maker of the rust-proof metal.