POSCO Under Pressure to Increase Steel Production Following Japanese Earthquake

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Researched by Industrial Info Resources (Sugar Land, Texas)--Japan exported 43.4 million metric tons of steel in 2010, 26% more than the previous year. This jump in exports signaled the beginning of a recovery from the world economic crisis. Many South Korean businesses import a significant amount of steel from Japan; however, imports have been disrupted following the earthquake on March 11.

In 2010, South Korea, which is the No. 1 importer of Japanese steel, imported 10.96 million metric tons of steel from Japan, 11.5% more than in 2009. But South Korea is now short of steel, and companies are demanding that POSCO (NYSE:PKX) (Pohang, South Korea), one of the world's largest steel producers, increase production. POSCO has set up a task force to minimize the impact of the steel shortage. It will investigate company needs on a case-by-case basis, and from there will begin arranging for maintenance and expansions of existing steel mills. The company is currently operating at near 100% capacity and believes that fulfilling domestic demand will be difficult.

On average, POSCO has a production capacity of about 33 million tons per year, but it plans to boost this year's production by at least 1 million tons. Currently, Industrial Info is following a $70 million addition at POSCO's Changwon steel works in the South Kyongsang province. The addition, which kicked off last year, will boost production at Changwon steel works by 240,000 metric tons of raw steel and 220,000 metric tons of finished blooms per year. More additions and expansions could follow.

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