POSCO Broadens Business Growth with Focus on Environmentally Friendly Energy Resources

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Researched by Industrial Info Resources (Sugar Land, Texas)--Integrated steel producing company POSCO (NYSE:PKX) (Pohang-Si, South Korea) is seeking avenues of growth and, in the process, is broadening the scope of its business interests. POSCO is emphasizing the materials and eco-friendly business sectors, following an environmentally friendly management policy and the government's low-carbon green growth policy.

POSCO Environment & Energy (E&E) was set up in August 2009 to focus on the refuse energy business. The aim of the company is to convert household sewage or bio-waste to fuel, and then use it to produce electricity. Sewage is thus dried and modified to form an energy resource called refuse-derived fuel (RDF). The RDF projects are currently being implemented in Pohang and Busan, while plans are being formulated to expand the projects nationwide. The upcoming power plant at Busan will utilize 900 tons per day of refuse and generate 25 megawatts (MW) of power. The plant will be the largest of its kind in Asia. The RDF projects will enable POSCO to secure carbon credits and renewable portfolio standard rights.

POSCO Power (Seoul, South Korea), a subsidiary of POSCO and South Korea's largest private power company, is exploring the development of fuel cells that can replace diesel engines in ships. By international regulation, shipbuilders will be required to trim emissions of nitrogen dioxide by half the current levels by 2016, and the new technology is expected to help ships meet this regulation. The company plans to develop fuel cell technologies, starting sometime next month. The existing fuel cell manufacturing facility in Pohang will be expanded with the addition of a "stack" manufacturing plant by the end of 2009. The additional facility is an essential component of electricity generation. About $368.6 million will be invested by POSCO in 2012 to begin commercial production of a third-generation fuel cell that will effectively replace the existing melted carbonate and phosphate fuel cell.

Another line of business that POSCO is exploring is the manufacture of synthetic natural gas (SNG) from cheap coal. The venture is being developed in partnership with SK Energy Company Limited (SEO:96770) (Seoul). The process involves gasification of cheap coal by subjecting it to high pressure and high temperatures, followed by refining and synthesis processes. Through this venture, POSCO will be able to procure SNG at costs that are 30% lower than procuring it from natural reservoirs. Further, the local industry will be able to save almost $172 million in annual import costs. POSCO intends to invest more than $858 million to set up a 500,000-ton SNG plant by 2013. With only the United States currently manufacturing SNG, expectations for the venture are high.

Another line of business that POSCO is exploring is materials development. The company organized an across-the-board workshop last month to discuss business prospects that will lead to development of next-generation super-light and super-strong materials. The company is studying each prospect, and the analysis will be reflected in the company's mid-term management strategy. POSCO intends to pursue research and development activities for material applications and related businesses from early next year.

Among other developments, Chung Joon-yang, CEO of POSCO, signed a memorandum of understanding with UKTMP JSC (Astana, Kazakhstan) in late September whereby the two companies will set up a titanium slab production facility at Ust-Kamenogorsk in eastern Kazakhstan. The 50:50 joint venture will set up the plant by early 2010. POSCO will transport titanium slabs to its domestic plants and use the material to make titanium plates. The plates then will be sold in South Korea, Europe and China. Titanium is used in shipbuilding, airplane engines and frames, and atomic power generation because of its resistance to seawater, low weight, and inherent strength. For additional information, see October 12, 2009, article - POSCO to Build Titanium Slab Factory in Kazakhstan.

In yet another aspect of materials development, POSCO set up POS-HiMetal, a ferromanganese manufacturing company. Construction of the 75,000-ton-per-year plant will begin in April 2010 and is scheduled to be completed by September 2011. POSCO plans to invest more than $188 million in the project. The ferromanganese produced will be of high purity. Ferromanganese is used as a raw material in the manufacture of high manganese steel required by the automobile industry. The need to develop a brand of very pure ferromanganese arose because the addition of solid manganese metals in high quantities significantly lowers the temperature of molten iron, resulting in loss of quality and a rise in costs. The company will set up the plant with technology patented by Dongbu Metal (Seoul, South Korea).

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