S. Korean steelmakers to extend output cut amid downturn

SEOUL, Feb. 3 (Yonhap) -- POSCO and other South Korean steelmakers are planning
to extend a production cut to cope with tapering demand, industry sources said
Tuesday.
Local industry leader POSCO, also the world's fourth-largest steelmaker, said
Monday it would continue reduced production into February for the third straight
month.
Crude steel output will be reduced by about 200,000 metric tons this month,
bringing the total output cut since December to 770,000 tons, it said.
"Compared with the two previous months, the February output cut is smaller as
local carmakers are returning to regular operations," said a POSCO official.
The planned production cut for this month is equivalent to 7.2 percent of its
monthly production of 2.75 million tons on average.
"The February cut was widely expected. But compared with global rivals, POSCO's
output reduction is relatively small," said Chung Ji-yoon, an analyst at Hi
Investment & Securities. "Still, it's hard to predict its output plans going
forward because market conditions are quite uncertain."
POSCO cut output in December for the first time in its 40-year history as demand
from builders and carmakers slumped.
The company added it may need to produce at a lower-than-average rate until the
end of this quarter. Crude steel production for 2009 may be between 29 million
metric tons and 32 million tons, a drop of as much as 12 percent from 2008,
according to POSCO.
Hyundai Steel Co., the nation's No. 2 steelmaker, is also considering an output
cut of 50,000 tons this month. The steelmaker is able to produce 11 million tons
annually. In December and January, it reduced its steel output by 250,000 tons
and 200,000 tons, respectively.
Analysts said it would take time for the industry to see a meaningful recovery.
"There are no positive signals that the steelmaking industry is likely to recover
any time soon," said Chung Jae-ho, an analyst at Daewoo Securities. "This cycle
of decline may end during the third or fourth quarter of the year."
Stimulus initiatives set forth in China and other nations may aid the sector's
recovery in the second half of the year.
The Chinese government said recently it will spend 4 trillion yuan (US$584
billion) on infrastructure projects that require steel and metals.
sam@yna.co.kr
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