Korean steel giant POSCO broke ground on a new KOR1.3tri ($1.2bn) plant in the southeastern city of Pohang.

The facility will be the company’s third plant to employ its own Finex technology, touted as more environmentally friendly and cost effective than conventional steelmaking methods.

The newest plant, which will be completed by July 2013, will have a 2Mt/y capacity, which would elevate POSCO’s Finex output capacity to 4.1Mt or 25% of its total crude steel capacity that year.

“FINEX technology is an innovation that opens the next generation for iron-making, enabling steelmakers to use low-grade coal fines that account for about 80% of the world’s iron ore deposits. The eco-friendly process will also dramatically reduce pollution from the production process,” POSCO Chairman Chung Joon-yang said.

The FINEX method enables POSCO, currently the world’s third-largest steel maker, to use cheaper raw materials like iron ore fines and non-cocking coal to produce steel products that are comparable in quality to those produced from the conventional blast-furnace process.

This allows the company to save costs in both facility investment and operation by 15% each.