South Korean steelmaker Posco, the world's sixth-biggest steel producer, has announced plans to help set up a $1.6-billion steel mill in southeastern Iran, a report said.

Posco said that it plans to take eight per cent of the project to build the 1.6-million-tonne steel plant with Iran's Pars Kohan Diarparsian Steel (PKP) in cooperation with its affiliates, added the Iran Daily News report.

The plant will be built in the port city of Chabahar in Iran's southeastern province of Sistan-Baluchestan, it said.

Posco aims to break ground on the plant next year, with a plan to add facilities producing cold-rolled and galvanized steel in 2019, added the report.

Iran is currently the largest steelmaker in the Middle East and North Africa (Mena). Its steel output totaled 16.33 million tonnes in 2014, securing the country's place as the 15th largest producer in the world.

The country aims to more than triple its steel output to 55 million tonnes by 2025, hoping to reduce its imports of steel products such as auto sheets, added the report.