HONG KONG (Yonhap News) ― South Korea’s leading steelmaker POSCO and Hyundai Group, known for its business ties with North Korea, broke ground Monday on a logistics park in northeastern China, company officials said.

The two South Korean firms started construction of the 1.5-square-kilometer distribution center in the city of Hunchun, located in China’s northeastern Yanbian Korean Autonomous Prefecture.

The distribution center, expected to have a capacity of 13 million tons by 2020, will handle agricultural and marine products, timber, auto spare parts, retail goods and optical instruments produced in the Jilin and Heilongjiang provinces to the southeastern region.

The center will also be equipped with facilities to process raw materials.

Hunchun has been touted as a “window” to the northeastern region that encompasses the three cities of Changchun, Jilin and Tumen, which are opening up to international markets.

It is China’s only border city located in the junction of China, North Korea and Russia, and aims to become an international economic cooperation zone.

The two companies expected the use of the logistics park will be extended to connect the North Korean port of Rajin to China’s northeastern region.

China and North Korea earlier agreed to jointly develop Rajin, a North Korean port town neighboring Hunchun.

The two countries have recently moved toward carrying out joint development projects along the border, and have started to build a bridge across the Amnok River, which connects the Chinese city of Hunchun with Rajin.

POSCO and Hyundai Group will share the cost for the construction of the Hunchun center, estimated at 200 billion won ($177 million) in total, with the former contributing 80 percent of the cost.

The first phase of the distribution park will be completed by the end of 2013, while the construction of the second and third phases will be finished by 2019, according to the companies.