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Posco hunts for potential market

Orissa may lose its biggest foreign investor Korean steel giant Pohang Steel Company (Posco) if it does not signal green to the company soon. It is worth mentioning that the largest auto grade steel manufacturer in the world has proposed the Orissa government to set up a 10 million tonnes steel plant at an investment of $8.4 billion in the state. But as an Indian trend of prolonging the decision unnecessarily may force Posco to opt for setting up its steel plant in other states rich in iron ore if the Orissa government is delaying the proposal further.

The MoU
The company had signed an MoU with the state government in mid-August. Now the ball is in the government's court. The company would not make any investments other than what was required to set up the plant. The company could even decide against implementing its plans if the infrastructure is not provided. The project is at a preliminary stage and that the company is carrying out studies. Orissa lacks a deep sea harbour which is essential for the export of finished goods and import of raw materials. As far as proposal for dumping Brazil for India goes, the two projects may even be carried out simultaneously if conditions allowed, as both the regions have a good source of raw materials and a growing market. Of the $8.4bn that Posco plans to bring in, $6.3bn would be for the steel plant, while the remaining would be brought in by its joint venture partner BHP Billiton for mining. Posco, meanwhile, has plans to increase sourcing of its iron ore from India, from the current 2m tonnes to 10m tonnes per annum in phases, to meet its current requirement. Posco consumes over 40m tonnes of iron ore, of which only 2m tonnes are sourced from India.

From a humble beginning in 1968 as a small, government-owned steel company, Posco has flourished over the years to become the world’s leading steel producer. Today, as it celebrates the second anniversary marking its privatization, Posco stands at the pinnacle of the steel industry, poised and ready to surpass the 30 million ton mark in annual production and reach the goal of attaining 36 trillion won in corporate value by the year 2007. Headquartered in the southeastern port city of Pohang, Posco employs approximately 19,200 and generated net earnings of 819 billion won (approximately US$671.3 million) in 2001. Growing from a single plant in the early 1970s, the company now operates two of the world’s premier steel producing facilities, Pohang and Gwangyang Works, and has forged strategic alliances and partnerships with numerous companies in Asia, the Americas and Europe. Posco has become a truly global company with a vision for the future. Yet it is from the past and its reliance on core business principles that the company draws the strength and courage needed to continuously move forward in this ever-changing industry, seeking out new niches in the global marketplace. As the world’s most competitive steel company, Posco continues to make new ground in the areas of environmentally friendly production techniques, innovative management practices and investor relations (IR). Today, the company’s grand vision extends far beyond steel, as Posco continues to quietly work behind the scenes to enrich the future of humankind through tomorrow’s high-tech industries. The company’s focus on producing the highest quality steel materials for the customers, while maximizing shareholder value, has enabled it to become an extremely efficient, production oriented company. At present, the combined steel output of the two primary steelworks, the Pohang Works (899 hectares) and the Gwangyang Works (1,253 hectares), totals 28 million tons and includes hot rolled coil and plates, cold rolled sheets, plates and wire rods, flat rolled magnetic steel sheets and strips, electrical steel sheets and stainless steel products.

Posco produces some 26 million tons of steel products each year, enough to produce about 100,000 compact cars a day. Today, the company ships these products to over 60 countries around the globe, satisfying some of the world’s most quality-sensitive manufacturers. Operating a total of five hot strip mills and one mini-mill, Posco produces some 21.24 million tons of hot rolled sheet annually, of which 9.35 million tons is delivered to customers in the form of finished products for use in automobiles, steel structures, steel pipe, home appliances and a variety of other products. A portion of the hot rolled sheet output is further processed into value-added products such as cold rolled products and electrical sheet.

Pohang Works
The Pohang Works’ three plate mills produce some 3.11 million tons of plate products annually. Commonly used in ships, bridges, and buildings, Posco plate products have played a decisive supporting role in the development of Korea’s globally competitive shipbuilding industry. In response to increasing demand for high-grade specialty products, the company continues to develop production technology and commercialize plates with applications in welded structures, marine structures, and pressure vessels as well as machinery, pipe, and storage tanks used in extreme low-temperature environments. The three wire rod mills at the Pohang Works produce some 1.92 million tons of standard and specialty steel wire rods annually. The former category includes commercial-grade wire rods used to make screws, nails, barbed wire, and wire mesh as well as high-grade wire rods used for wire rope, springs, welding electrode, and underwater cable. The latter includes wire rods used to make high tensile strength nuts and bolts, piano wire, tire cord, pre-stressed concrete wire, and components for precision equipment.

Booming support for Posco
Since commissioning Korea’s first cold rolling mill back in 1977 in support of the booming domestic automobile and home appliance industries, Posco has steadily expanded production output to 9.15 million tons annually with two mills at the Pohang Works and four at the Gwangyang Works. Cold rolled products are primarily used in home appliances, automobiles, food containers, and exterior construction materials. Today, the company offers a wide range of high-grade products that can satisfy virtually any customer need. Its systematic efforts to boost demand for steel cans and other value-added products have also significantly increased sales in this product segment. Another source of growth has been increasing orders from Japanese automakers, whose vehicles set the standard for quality in global markets.

Advanced production technology
Requiring advanced production technology, steel for use in the electric and electronics industries represents another value-added Posco product category. Beginning with an annual capacity of 20,000 tons in 1980, it has continued to expand its electrical steel production facilities at the Pohang Works to reach production of 540,000 tons annually, today. Of this total, 40,000 tons is grain-oriented electrical sheet used for power generators and transformers, while the remaining 500,000 tons is non-oriented electrical sheet for electric motors.

Capacity expansion
Posco, the world’s fourth largest steelmaker, is all set to boost its hot-rolled steel production capacity by 900,000 tons from October to meet rising demand. The company will begin operation of the second minimill in Gwangyang’s No. 1 plant from October. Using a minimill is a relatively easy way to control production volume depending on the market situation, compared with blast furnace system. With the beginning of the minimill’s operation, Posco’s crude steel production capacity will be 29.8 million tons a year, up from 28.9 million tons at the end of 2003.

Striving to be the industry leader
Basic principles needed to survive in the highly competitive global marketplace- high brand value for products and services - superiority in managerial resources and administrative proficiency

Valuing innovation
Source of value creation for the 21st century knowledge-based society- Continuous innovation aimed at improving efficiency- Exploration of creative technology and new ideas Respecting core business and ethical principles Foundation for ongoing development of the company- Transparent and responsible management for shareholders- Adherence to internationally recognized standards of corporate governance and recognition of our social responsibility.

Posco’s Mission
We, as a global player, sustain a healthy growth with our competence in steel business Posco is committed to being a continuously growing global company with the world’s highest level of competitiveness.- A company with the highest corporate value in the steel industry - A company with a 21st century growth engine- A company that cultivates talented leaders and strives for continuous innovation. The company has become the industry’s No. 1 company in terms of corporate value by bolstering competitiveness. Continued thrust has been put to expand global foundation in China, Southeast Asia, etc. The company has a distinction in advancing into the energy and IT industries.

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