2011 SEAISI Singapore Conference &
POSCO’s Regional Strategies
toward Southeast Asian Steel Industries
May 23, 2011
Chief Executive Officer, POSCO
Joon-Yang Chung
Snapshot of POSCO’s History
History of ‘Creative Management’ : Ability to Create Something from Scratch
POSCO Overview (’10)
Crude Steel Production
(mmt)
 Steel Production : 33.7 Million tons
 Employment: 16,898 employees
FINEX
Commercialized
30
Privatized
NYSE Listed
20
10
Gwangyang Works
Constructed
Pohang Works
Constructed
 Sales : USD 28.2 Billion
 Market Capitalization: USD 38.6 Billion (‘11.5)
07
Global Evaluations
00
94
 Davos Forum selected POSCO as ‘Global
Top 100 Company’ (’10.1)
92
 Dow Jones Sustainability Index included
POSCO as a sustainable leading company
for 6 consecutive years (’10.9)
83
68Foundation
1968 1970
1980
1990
2000
2007
2010
1
 World Steel Dynamics recognized POSCO
for the world’s best competitiveness (WSD, ‘10)
 Fortune Magazine's “most admired company”
(metal category, ’11.3)
2
Ⅰ
Key Issues for Global Steel Industry
Ⅱ
Potential of South-east Asian Steel Industry
Ⅲ
POSCO in South-east Asia
Ⅳ
Concluding Remarks
3
① Challenges and Opportunities on Environment
Environment: the biggest challenge and core of competitiveness for steel industry
 Regulations: Post-Kyoto Regime, National Act for Green Growth, etc.
• EU adapted its Emission Trading Scheme in 2005
 Challenges: Demand for Decreasing Energy Usage and for CO2 Reduction
• The steel industry accounts for 4~5% of total global CO2 gas emissions – IEA
Emerging new paradigm of “Low Carbon and Green Growth”
Climate Change / Green Growth were key issues of Seoul G20 Business Summit, 2010
Low Carbon
and
Green Growth
4
POSCO, for Global Green Growth Leader
Enforcing Steel Competitiveness
through Improvement of Energy Efficiency and Breakthrough Technology
Improvement of
Energy Efficiency
-Improve energy efficiency
of current processes
by heat recovery and re-use
Development of
New CO2 reduction
Steel Process
-Develop innovative
steelmaking processes
to save energy
• POSBOP
(POSCO Basic Oxygen Process)
- Innovative steelmaking
process with lower
energy intensity
Coke Dry Quenching
Invest 700 million USD by 2015
to improve energy efficiency
via by-product gas combined
cycle power plant, etc.
Development of
Hydrogen
Steelmaking
-Hydrogen replaces coal
as a reducing material
-Dramatic reduction of
CO2 emission
Very-high-temperature
Reactor (VHTR)
H2
• CEM
-Energy saving of reheating
step by connecting
two separate processes
FOG, SNG
5
② Continuous Challenges on Raw Materials
Demand for raw materials jumps as steel production rises ,
but supply is limited
 China’s surging imports of iron ore/coking coal and India’s coking coal
 Continuous Oligopoly of big raw material suppliers in the world market
 Resource nationalism is growing
Global Seaborne Supply
Iron Ore
Global Big3’s Market Share (’09)
Coking Coal
941
62%
32%
12%
Coking coal
Steel
266
China
imports
Iron ore
197
455
China/India
imports
599
82
70
2000
13
2010
2000
2010
(unit: million tons)
Mining
firms
Concentration
2001
BHP + Billiton
2006
CVRD + Inco,
Xstrata + Falconbridge
2007
Rio Tinto + Alcan
Source: Deutsche Securities
☞ Supply of raw materials will remain tight in the future
6
POSCO’s Mitigation Efforts
Investment in mine development to secure raw materials and enhance
self-sufficiency
 POSCO’s goal of self-sufficiency : 50% by 2014, 75% by 2018
Coking
coal
Iron ore
 Increasing investment in New Regions: Africa/Mongolia/Siberia/Indonesia, etc.
 Stable supply for domestic and overseas new production bases : Indonesia, India, Brazil
 Increasing use of low grade ore
- Securing medium and low grade ore: Magnetite, Itabirite, fine ore, etc.
 Diversification of iron ore sources
 Building production bases in raw material-producing emerging countries: Indonesia,
India, Brazil
Development of next generation processes
 Low grade material (Magnetite · Low price coal), next generation Finex & EAF Process, H₂ reduction
Process
Existing integrated
(Blast furnace-Convert
furnace)
Low grade fuel, iron
(Blast furnace-Convert
furnace)
Iron ore
Hematite, Low P
Pisolite, High Al₂O₃/P ore
Coking
coal
Hard coking coal
(Low Ash/S/P)
Semi-soft/semi-hard coking
coal (high Ash/S/P)
Next generation integrated
(HydrogenㆍAtomic energy
steelmaking)
Fine magnetite ore, high P
Semi-soft/semi-hard coking
coal, Ultra-low price coal 7
POSCO’s Green Technology: FINEX
FINEX, the world-first commercialized innovative environment-friendly
iron-making process
 Cost-competitive by direct use of ore fines and non-coking coal without pre-treatment
 Eco-friendly since FINEX has great potential to reduce CO2 emission by CCS technology
- Easier application of CCS(Carbon Capture and Storage) thanks to use of pure oxygen
FINEX
Non-coking coal
Coal
Briquetter
Iron ore fines
Fluidized bed
Reactor
Power Plant
(CCPP*)
Relative
Pollutant
Emission(%) SO
x
Sinter
Plant
28%
50
Hot Compacted
Iron(HCI)
Melting
Furnace
Coke
Oven
3%
Pig Iron
※ CCPP : Combined Cycle Power Plant
Dust
BF
Off–gas
Heat Recovery
CO2 Removal
NOx
100
CO2
Sequestration
1%
0
BF
FINEX
Sox : Sulfur taken into slag as CaS
Nox : Extremely low due to the use of pure oxygen instead of air
Dust : Lower generation due to the absence of sintering and
8
coking plants
Ⅰ
Key Issues for Global Steel Industry
Ⅱ
Potential of South-east Asian Steel Industry
Ⅲ
POSCO in South-east Asia
Ⅳ
Concluding Remarks
9
Potential of South-east Asian Steel Industry
High growth potential after China and India
 Expected 5.9% annual growth rate by 2015
- Likely GDP in 2015 is $1.4 trillion, almost the same as in India
Expected steel supply shortage due to annual demand growth rate of over 7.6%
 World’s largest import region with shortage of 37 mil. tons in 2010
- Increasing imports of semi-finished and hot-coil products owing to supply-demand imbalance
between upstream and downstream (Indonesia, Vietnam, Thailand)
Economic Annual Growth Forecast (2010~2015)
(unit: percent)
ASEAN6’s Steel Demand-Supply Forecast
81
(unit: million ton)
7.6%
9.1
56
8.6
Demand
37
5.9
5.5
4.0
41
4.3
Shortage
25
56
6.6%
5.6%
3.5%
25
Production
China
India Russia Brazil
Eastern
Europe
16
19
ASEAN6
2005
Source: Global Insight, April 2011, ASEAN6: Thailand, Vietnam, Indonesia, Malaysia, Philippines, Singapore
2010
2015
10
Challenges of South-east Asian Steel Industry
Southeast Asia’s steel industry has high potential, but low competitiveness.
 Necessity to enhance competitiveness of technology, capital strength, and economies of scale
Challenges of South-east Asian Steel Industry
Technology
• Lack of regional upstream producers
• Over-dependence on imports
with less developed technology
to produce high-end steel
Enhancement of competitiveness
by cooperating with advanced
global steelmakers
Virtuous cycle of fostering steel
Economies
of Scale
Capital
• Lower market concentration
• Least-developed manufacturing
industry
• Underfunded steel industry
• Underdeveloped infrastructure
industry and development of
steel-related industries
Synergy of steel & non-steel
sectors
- resource development,
infrastructure expansion
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Ⅰ
Key Issues for Global Steel Industry
Ⅱ
Potential of South-east Asian Steel Industry
Ⅲ
POSCO in South-east Asia
Ⅳ
Concluding Remarks
12
POSCO in Southeast Asia
Increasing upstream and downstream investment to lead development of
manufacturing and infrastructure
 New Investment into expansion and development of sales and production bases
in order to meet market demands
Plants and SCMs
New investment plan
- 2 Sales base: POSCO India, POSCO South Asia
- 8 production facilities and 11 SCMs
- Downstream such as cold-rolling mill in India, etc.
- Integrated mills in Indonesia (under construction)
and India (planned)
POSCO India
POSCO
Maharashtra
POSCO ICPC
POSCO IDPC
POSCO ISPC
POSCO IPPC
Myanmar
POSCO
Arctic
POSCO Vietnam
POSCO
POSCO VST
South Asia
POSCO SS-Vina
POSCO TBPC
POSVINA
VPS
POSCO Malaysia POSCO VHPC
POSCO VNPC
POSCO MKPC
POSCO IJPC
POSMI
POSCO PMPC
North
America
India
South
America
Africa
Indonesia
Upstream
Downstream
SCM: Supply Chain Management
13
PT.KS-POSCO JVC in Indonesia
Win-Win strategy with local steelmakers and contribution to domestic
economic growth
Integrated Mill JVC in Indonesia
Win-Win Strategy
- Location : Cilegon in Banten
- Partner : Krakautau (PT.KS)
- Share : POSCO 70%, PT.KS 30%
Contribution to boost competitiveness
of steel and related industries
- Capacity in Phase 1 : Slab 1.5 mil. tons,
Steel plate 1.5 mil. tons
 Stable supply of slabs to KS
- Construction Period : 2010-2013
 Building development base for related industries
and increasing productivity
Economic Ripple Effects
PT.KS-POSCO JVC
 production inducement worth 600 trillion Rp
 Creation of 1.5 mil of new jobs
14
Ⅰ
Key Issues for Global Steel Industry
Ⅱ
Potential of South-east Asian Steel Industry
Ⅲ
POSCO in South-east Asia
Ⅳ
Concluding Remarks
15
Concluding Remarks
POSCO expects rapid growth in SEA’s economic growth potential
SEA’s growing economy will need quantitative and qualitative
advancement of steel as demand is expected to rapidly increase.
POSCO is setting up SEA “production bases” with local partners,
utilizing world-class Operational Expertise and Green Technology to
satisfy local steel demands
POSCO’s SEA strategy is to ultimately contribute to the economic
development of South-east Asia as a whole, through investment in
regional steel production.
Collaboration between POSCO and SEA regional steel producers creates
many opportunities for cooperation and high synergy, with ideal
combination of technology, capital, markets and labor.
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