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105738
Wed, 02/10/2010 - 11:49
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https://oananews.org//node/105738
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(News Focus) POSCO expands with guns blazing and an eye on foreign rivals
By Park Sang-soo
SEOUL, Feb. 10 (Yonhap) -- It takes a steely resolve to push for overseas expansion at a time when most companies are buckling under the pressure of a global economic downturn.
But for POSCO, South Korea's leading steelmaker, the crisis has presented an
opportunity to secure an iron grip on the worldwide market.
When Chief Executive Officer Chung Joon-yang took the helm at the world's
fourth-largest steelmaker in February last year, he pledged to boost the
company's profile through strategic investment and mergers.
A year on, he has made it clear once again that POSCO will continue to chase
acquisitions at home and abroad, saying "the company will seek aggressive
management to seize opportunities ahead of others in the post-crisis era."
The company is pushing to build a US$7 billion plant in India's Karnataka state
in addition to a $12 billion project in Orissa and a $6 billion Indonesian plant.
And over the past year, POSCO has taken over Asia Stainless Corp. in Vietnam and
Taihan ST Corp. in Korea.
"POSCO's expansion push, particularly in overseas markets, is aimed at asserting
its market presence and closing the gap with Chinese rivals," said Kim
Gyung-jung, an analyst at Samsung Securities. "POSCO also wants to reduce its
dependence on big suppliers of raw materials."
The expansion is just beginning. Last month, POSCO said it plans to nearly double
its investment spending this year to a record 9.3 trillion won ($8.3 billion),
with 3 trillion won earmarked for acquisitions.
And among numerous targets, its top priority at the moment is to snap up the 68
percent stake up for sale in Daewoo International Corp, a deal that could fetch
around 2.5 trillion won. POSCO also hopes to complete negotiations soon on its
acquisition of Thainox Stainless Plc., Southeast Asia's top stainless steel
producer.
The company also said last month it may buy up to 15 percent of an iron ore
project in western Australia, Roy Hill, for an undisclosed amount.
"Basically, we have a two-pronged strategy for overseas expansion," said Choe
Yoon-jung, a company spokeswoman. "First, we venture into areas where demand is
rising. Second, we want to secure stable supplies of raw materials."
She said POSCO's overseas push is also aimed at boosting output to reduce costs,
thus raising profitability.
Analysts say that the Orissa project and other overseas projects will help raise
POSCO's steel output dramatically, helping it better compete with Chinese rivals.
Chinese steel mills, led by Bao Steel Group Corp., are gobbling up stakes in
overseas mines, and their production is expected to increase sharply down the
road.
POCSO's Orissa project started in 2007 but has been delayed due to regulatory
issues. The company has said it wants to start the construction of the steel mill
this year, and produce 12 million tons of steel annually upon completion.
Last month, POSCO said that it had secured India's permission to acquire 88
percent of the land needed for the plant and was continuing talks, which have not
always been smooth, with local residents to purchase the rest.
"The Indian project is very important for POSCO as it will provide cheap raw
materials to the steelmaker and expand POSCO's output," said Ha Jong-hyuck, an
analyst at KTB Securities Co.
Output expansions overseas will add around 26 million tons, accounting for around
75 percent of POSCO's annual crude steel output of 34.7 million tons in 2008,
analysts say.
According to the World Steel Association, ArcelorMittal of Luxembourg was the
world's biggest steel producer with an output of 103.3 million tons in 2008,
followed by Japan's Nippon Steel Corp. with 37.5 million tons and Bao Steel Group
of China with 35.4 million tons.
Four Chinese steel producers were ranked among the world's top 10 on the back of
China's drive to boost its steelmaking industry, according to the association.
Hebei Steel Group ranked No. 5 with output of 33.3 million tons, and Wuhan Steel
Group and Jiangsu Shagang Group sat at seventh and ninth, respectively, it said.
"The delay of the Orissa project and slowing domestic growth could leave POSCO
lagging behind foreign rivals," said Moon Jung-up, an analyst with Daeshin
Investment & Securities. "Chinese rivals are threatening to take on POSCO."
POSCO is expecting an increase in steel production this year in tandem with a
mild economic recovery. With nations worldwide set to end their stimulus policies
and the recovery progressing slowly, POSCO's earnings growth may fall below
expectations.
The company expects to increase crude steel production by 17 percent to 34.4
million tons this year.
"We expect POSCO's earnings to improve this year on recovering demand from the
auto, electronics and shipbuilding industries," said Shin Yoon-shik, analyst at
Meritz Securities. "But lower steel prices and increased costs of raw materials
may limit any sharp gains."
POSCO said last month its earnings reached 1.28 trillion won in the fourth
quarter of last year, up 77 percent from a year earlier, on the back of rising
demand and lower raw material costs.
sam@yna.co.kr
(END)
SEOUL, Feb. 10 (Yonhap) -- It takes a steely resolve to push for overseas expansion at a time when most companies are buckling under the pressure of a global economic downturn.
But for POSCO, South Korea's leading steelmaker, the crisis has presented an
opportunity to secure an iron grip on the worldwide market.
When Chief Executive Officer Chung Joon-yang took the helm at the world's
fourth-largest steelmaker in February last year, he pledged to boost the
company's profile through strategic investment and mergers.
A year on, he has made it clear once again that POSCO will continue to chase
acquisitions at home and abroad, saying "the company will seek aggressive
management to seize opportunities ahead of others in the post-crisis era."
The company is pushing to build a US$7 billion plant in India's Karnataka state
in addition to a $12 billion project in Orissa and a $6 billion Indonesian plant.
And over the past year, POSCO has taken over Asia Stainless Corp. in Vietnam and
Taihan ST Corp. in Korea.
"POSCO's expansion push, particularly in overseas markets, is aimed at asserting
its market presence and closing the gap with Chinese rivals," said Kim
Gyung-jung, an analyst at Samsung Securities. "POSCO also wants to reduce its
dependence on big suppliers of raw materials."
The expansion is just beginning. Last month, POSCO said it plans to nearly double
its investment spending this year to a record 9.3 trillion won ($8.3 billion),
with 3 trillion won earmarked for acquisitions.
And among numerous targets, its top priority at the moment is to snap up the 68
percent stake up for sale in Daewoo International Corp, a deal that could fetch
around 2.5 trillion won. POSCO also hopes to complete negotiations soon on its
acquisition of Thainox Stainless Plc., Southeast Asia's top stainless steel
producer.
The company also said last month it may buy up to 15 percent of an iron ore
project in western Australia, Roy Hill, for an undisclosed amount.
"Basically, we have a two-pronged strategy for overseas expansion," said Choe
Yoon-jung, a company spokeswoman. "First, we venture into areas where demand is
rising. Second, we want to secure stable supplies of raw materials."
She said POSCO's overseas push is also aimed at boosting output to reduce costs,
thus raising profitability.
Analysts say that the Orissa project and other overseas projects will help raise
POSCO's steel output dramatically, helping it better compete with Chinese rivals.
Chinese steel mills, led by Bao Steel Group Corp., are gobbling up stakes in
overseas mines, and their production is expected to increase sharply down the
road.
POCSO's Orissa project started in 2007 but has been delayed due to regulatory
issues. The company has said it wants to start the construction of the steel mill
this year, and produce 12 million tons of steel annually upon completion.
Last month, POSCO said that it had secured India's permission to acquire 88
percent of the land needed for the plant and was continuing talks, which have not
always been smooth, with local residents to purchase the rest.
"The Indian project is very important for POSCO as it will provide cheap raw
materials to the steelmaker and expand POSCO's output," said Ha Jong-hyuck, an
analyst at KTB Securities Co.
Output expansions overseas will add around 26 million tons, accounting for around
75 percent of POSCO's annual crude steel output of 34.7 million tons in 2008,
analysts say.
According to the World Steel Association, ArcelorMittal of Luxembourg was the
world's biggest steel producer with an output of 103.3 million tons in 2008,
followed by Japan's Nippon Steel Corp. with 37.5 million tons and Bao Steel Group
of China with 35.4 million tons.
Four Chinese steel producers were ranked among the world's top 10 on the back of
China's drive to boost its steelmaking industry, according to the association.
Hebei Steel Group ranked No. 5 with output of 33.3 million tons, and Wuhan Steel
Group and Jiangsu Shagang Group sat at seventh and ninth, respectively, it said.
"The delay of the Orissa project and slowing domestic growth could leave POSCO
lagging behind foreign rivals," said Moon Jung-up, an analyst with Daeshin
Investment & Securities. "Chinese rivals are threatening to take on POSCO."
POSCO is expecting an increase in steel production this year in tandem with a
mild economic recovery. With nations worldwide set to end their stimulus policies
and the recovery progressing slowly, POSCO's earnings growth may fall below
expectations.
The company expects to increase crude steel production by 17 percent to 34.4
million tons this year.
"We expect POSCO's earnings to improve this year on recovering demand from the
auto, electronics and shipbuilding industries," said Shin Yoon-shik, analyst at
Meritz Securities. "But lower steel prices and increased costs of raw materials
may limit any sharp gains."
POSCO said last month its earnings reached 1.28 trillion won in the fourth
quarter of last year, up 77 percent from a year earlier, on the back of rising
demand and lower raw material costs.
sam@yna.co.kr
(END)
