South Korean steelmaker POSCO (005490.KS) has signed an agreement with Uttam Steel and Power to set up a 3 million tonne-per-year integrated steel plant in Maharashtra, the Indian company said on Tuesday.

The proposed joint venture plans to set up the steel plant in two phases and take advantage of an expected surge in steel demand in India.

Uttam Steel and Power is owned by the co-promoters of Uttam Galva Steels Ltd (UTTM.NS), which is jointly owned by the world's largest steelmaker ArcelorMittal (ISPA.AS).

Uttam Galva shares surged as much as 16 percent in morning trade on news of the joint venture.