POSCO Starts Operation of World's Most Productive Steel Furnace

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Researched by Industrial Info Resources (Sugar Land, Texas)--South Korea's steel manufacturer POSCO (NYSE:PKX) (Pohang-Si, South Korea) completed the upgrade project of the Number 4 Blast Furnace at the Gwangyang steel plant in South Jeolla and restarted the unit on July 21. The upgrade project began February 2009. After five months of renovation work, the capacity of the furnace has been increased 60%, from 3,800 cubic meters to 5,500 cubic meters. The hearth diameter of the furnace is 13.2 meters. The new capacity makes the furnace the world's largest in terms of daily crude production, which will now exceed 14,000 tons per day, equivalent to more than 5 million tons per year, of steel. The earlier capacity of the furnace was 3.1 million tons per year of steel. POSCO is now the world's first steel producer to have the capacity to produce 5 million tons per year of steel through a single blast furnace.

The upgraded furnace has been started in time for POSCO to take advantage of the rise in global steel demand and the decrease in steel inventories. With an annual capacity of 5 million tons, the blast furnace will produce an amount of steel equivalent to the annual demands of the five domestic automakers of South Korea. In anticipation of an increase in demand from shipbuilders and carmakers, the company has increased its 2009 production target 6.4%, from 28 million tons to 29.8 million tons. Lower raw material costs and higher worldwide sales should help POSCO improve profits in the second half of 2009. The company reported a year-over-year drop of 71% in its net income of $344.6 million in the second quarter. Sales dropped 15% year over year. The company was forced to reduce production 25% in the first quarter and 15% in the second quarter of 2009.

POSCO's Number 4 furnace is now the world's fifth-largest blast furnace. The world's largest furnace has a capacity of 5,775 cubic meters and is located at the Oita facility of Nippon Steel Corporation (TYO:5401) (Tokyo, Japan). The 5,580-cubic-meter furnace at the Cherepovets facility of Severstal' OAO (MCX:CHMF) (Cherepovets, Russia) is the second largest, followed by the 5,555-cubic-meter furnace at the Kimitsu facility, also owned by Nippon Steel. POSCO's furnace is preceded by the 5,513-cubic-meter furnace at the Duisberg-Schwelgern facility owned by ThyssenKrupp AG (ETR:TKA) (Dusseldorf, Germany). However, despite their larger sizes, these furnaces cannot match the 14,000-ton-per-day capacity of POSCO's furnace. POSCO's new capacity is at least 20% higher than that of its nearest competitor in terms of production.

The Number 4 furnace in Gwangyang has been operating since September 1992 and has since produced almost 52 million tons of molten iron. It is now the country's largest furnace and is 900 cubic meters bigger than the facility's Number 3 furnace, which has a capacity of 4,600 cubic meters and was previously the country's largest. The Number 3 furnace set a world record last year with 14,809 tons of steel produced in a single day.

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