The two companies will invest 4.13 billion yuan ($639 million) to build a joint venture producing high-end auto sheet metal in Tangshan, Hebei province, marking the largest single infusion of foreign investment in China's steel sector.

Under the agreement, the new joint venture will be a 50-50 partnership between HBIS Group and POSCO, with an annual designed production capacity of 1.35 million metric tons of high-end auto sheet metal.

Yu Yong, chairman of HBIS Group, one of China's largest steelmakers, said the two companies would synergize and capitalize on their strengths in terms of brand, technology, management, market and talent.

"POSCO is famous for leading technologies and equipment, and HBIS is also a renowned global steel company. Joining forces together, our cooperation will have a positive effect on China's high-end auto sheet materials, home appliances and the restructuring of the entire industry," Yu, who is also chairman of the World Steel Association, said during a video signing ceremony on Friday.

Choi Jeong-Woo, chief executive officer of POSCO, said, "We hope to work with HBIS to build a strong industrial ecosystem in China, the world's largest auto market, fostering the most competitive automotive steel sheet supplier.

"Today's signing ceremony marks the first step of the formal cooperation between the two parties. In the future, we will have more cooperative opportunities in both China and overseas markets."

The new partnership highlights the two companies' continued ambition to cater to the fast-growing Asia market as well as the booming China auto market, as they see rising growth opportunities in the next phase of high-quality development and accelerated upgrading of production and consumption structure in the nation.

According to the agreement, the joint venture will mainly produce high-end auto sheet metal as well as high-strength steel and home appliance sheet metal, offering green steel material solutions featuring low carbon, high strength and light weight for high-end brand cars and new energy vehicles.

Despite the COVID-19 pandemic, China's auto market became one of bright spots in the global auto market in 2020, with annual sales occupying 33 percent of world sales, data from the China Association of Automobile Manufacturers showed.

And the new energy vehicle market also showed an encouraging performance last year, with the production and sales of new energy vehicles both hitting 1.37 million units, up 7.5 percent and 10.9 percent year-on-year respectively.