South Korea's leading steelmaker, said on Monday that it is seeking to build a steel mill with a capacity of 1 million tonnes in Vietnam as part of efforts to boost capacity.

"The project may cost US$5 billion, and it may take three years to complete the plant," said an official at POSCO. "But detailed plans will be drawn up after we get final approval from the Vietnamese government."

POSCO, which already runs a steel mill in Vietnam with a capacity of 1.2 million tonnes, is proceeding with the new steel mill project to meet growing demand in the Southeast Asian country.

Demand for steel in Vietnam is projected to increase about 8.7 per cent per year until 2020, POSCO said.

Last year, POSCO acquired Asia Stainless Corp., a Vietnamese steelmaker that produces around 85,000 tonnes of stainless steel annually.