POSCO Going Global for Takeoff
By Jane Han
Confronting pressure from consolidations in the global steel market, Asia's No. 1 steel maker POSCO is aiming at quality-focused growth on the local market, while working up a more quantity-focused expansion overseas.
More investments will be made here to produce improved value-added products, while the steel group will continue to seek active big-scale expansion abroad utilizing its latest technologies, say company officials.
One of the initial goals is to increase the proportion of its strategic products, including auto and electrical steel sheets, by 2008.
To become the world's biggest automotive steel sheet producer, POSCO opened its sixth continuous galvanizing line (CGL) at its Gwangyang Mill last year.
After a 22-month-long build-up, the plant has an annual production capacity of 400,000 metric tons of steel sheets for automobiles, along with the capability of mass-producing 6.5 million metric tons of value-added steel sheets annually.
Pushing up the world's fourth-largest steel maker's edge in the competitive market overseas is its latest next-generation FINEX technology that eliminates the first step in the steel-making process of sintering and coking, and allows the direct use of low-cost ore fines and coal, cutting overall plant installation and operational costs.
The new method has put an end to the era of blast furnace steel manufacturing that has been responsible for 60 percent of all steel production in the world.
As the old process was unable to utilize iron ore fines and soft coal to produce molten iron, the world's steel industry has been making desperate efforts to develop a way to churn out steel from iron or powder.
A number of world's leading companies worldwide made attempts to commercialize technology similar to FINEX, which works around previous limitations, but have failed.
Now that POSCO successfully operated commercialized FINEX plant for more than six months, it plans to actively implement the eco-friendly process, which is designed to meet increasingly strict environmental regulations, in its new projects overseas.
The company, led by CEO Lee Ku-taek, said in May that it will adopt its self-developed technology in the $12 billion integrated steel project in Orissa, India. It will be POSCO's first steel mill outside of Korea to use FINEX on a large scale.
Although the plant is facing ongoing protests from locals, which is delaying the kick off of the initial work, POSCO says the Indian project will give a significant boost to the company's global strategy with the country's abundant natural resources and skilled workforce.
Last November in China, POSCO started operating the Zhangjiagang Pohang Stainless Steel (ZPSS) mill capable of producing 600,000 tons of stainless steel and hot-rolled products annually in Jiangsu Province.
This made POSCO the first foreign firm operating an integrated stainless steel mill in China, managing the entire production process from smelting iron ore to finished products, including the cold-rolled stainless plant it already operates.
In Vietnam, the company began constructing in August last year a cold-rolled steel plant with an annual production capacity of 1.2 million metric tons to be completed by 2009.
Additionally, a 3 million-ton hot-rolled mill will be finished by 2012.
As Vietnam's economy has been enjoying an annual 8-percent growth for the past two years, the steel-demanding auto, construction and shipbuilding industries, are enjoying a boom at the same time.
But because the country's supply isn't enough to meet the demand, POSCO says new mills will become a crucial provider in the region.
Auto Steel Sheets
As part of its efforts to accelerate its auto steel sheets business, POSCO plans aggressive investments in related expansion.
The company said in September it will invest $250 million to build an auto steel plate plant in Mexico by June 2009. The plant, to be built near the port city of Altamira, will have a production capacity of 400,000 metrics tons a year starting 2010.
Following the automotive steel processing center in Puebla, Mexico capable of processing 170,000 tons of steel annually, the new CGL plant is expected to become a major supplier for carmakers operating in the area.
Not only will the production feed international automakers, including GM, Toyota and Volkswagen in North and South America, but be a stable provider for Hyundai Motor operating in Brazil and Alabama.
To combat rising oil prices and global warming issue, POSCO has begun active investments in the business of fuel cell generators, which have twice the efficiency of conventional fossil fuel power plants and produce almost no pollution.
Most recently, the steel maker partnered with Fuel Cell Energy to build a $131 million plant in Youngil Bay, Pohang, to produce up to 100MW of electricity starting in 2010 and generating $437 million in revenue.
Company officials say the output from the plant is expected to be used by hospitals, broadcast stations, manufacturing facilities, hotels and shopping centers.
In August, POSCO and Korea Electric Power Corp. (KEPCO) teamed up to develop hydrogen fuel cell generator plants. The two expect the deal will help the commercialization of fuel cell generators to gain speed.