Posco Looks To Expand As Rivals Stall
Market Scan
Posco Looks To Expand As Rivals Stall
Tina Wang, 11.14.08, 07:12 AM EST
The South Korean steel maker stays focused on Vietnam, notwithstanding government rejection of its initial $5.4 billion steel mill proposal.
POSCO ADSSun Nov 16 2008 01:27 EST
$53.31$-6.49-10.85%1 day3 mo1 yearAdvanced
ArcelorMittal ADSSun Nov 16 2008 01:27 EST
$21.31$-1.37-6.04%1 day3 mo1 yearAdvanced
JFEEFSun Nov 16 2008 01:27 EST
-$20.50$0.000.00%1 day3 mo1 yearAdvanced
Undeterred by the global slowdown, South Korean steel maker Pohang Iron & Steel, better known as Posco, has set its sights on expanding in Vietnam, despite the failure on environmental grounds of its initial proposal for a billion-dollar steel mill there. It considers Vietnam a good opportunity to expand globally, even as rivals’ growth plans stall as a result of weakened demand.
Posco (nyse: PKX – news – people ), the world’s fourth-biggest steel maker by output, may be in a better position than its competitors to weather further price declines in prospect as China allows its own steel producers more leeway to export.
Yahoo! BuzzIn a reversal, the Vietnamese government prohibited Posco from building a $5.4 billion steel mill at Van Phong Bay, a picturesque, tourist-frequented area along the country’s south-central coast, the country’s state media reported Friday. Posco’s proposal, originally greenlighted by local authorities, sparked an outcry among residents, environmentalists and tourism operators.
Posco “will still be able to build another mill, but they’re currently looking for a new site,” the location of which is still unclear, said Lee Chang-mok, a Seoul-based analyst for Woori Investment & Securities. A plant of such scale takes four to five years of construction before production comes onstream, he said.
Posco is being aggressive about overseas expansion while others pull back on projects, in response to steel prices having halved from their peaks in July. Bigger rival ArcelorMittal (nyse: MT – news – people ) is said to be delaying construction or capacity expansion plans in India, Canada and Romania, while Japan’s JFE Holdings (other-otc: JFEEF – news – people ) is reportedly mulling suspending new steel mill investments in Brazil and Vietnam.
Meanwhile, China is reversing its policy of discouraging the outflow of domestically manufactured steel; previously, it had aimed to keep commodities within its borders to feed the country’s industrial boom. With economic growth having slowed to lows not seen in years, Beijing will roll back taxes on exports of cold-rolled, galvanized and other high-value-added steel starting Dec. 1, the Ministry of Finance said Thursday. A surge of output from China would further drive down the prices that South Korean and Japanese steel makers can command. Lee said, however, that Posco’s manufacturing costs are 20% less than the global average, thereby cushioning the impact.
Lee forecast that Posco’s profit would come in at 6.5 trillion won ($4.6 billion) in 2008 and 6.1 trillion won ($4.4 billion) in 2009. In Seoul trading Friday, Posco shares closed 3,500 won ($2.51), or 1.1%, lower, at 318,500 won ($228.71).