POSCO to Secure Global Technology Leadership
- 5-year mid-term strategy to begin next year

POSCO (Chairman Lee Ku-taek), in an effort to secure the global technology leadership under its mid-technology strategy target, is set to pull all of its resources to achieve its 12 technology development tasks. The steel maker plans to build a system for producing 34 million tons of crude steel by raising its productivity and through cost reduction.
The steel maker held a meeting of its technology policy committee on Oct. 27 and firmly set up a five-year mid-term strategy to begin starting next year and some important tasks that should be undertaken along the way.
At the meeting, the committee agreed to speed up securing a competitive edge based on its current technological strategy, focusing on the 12 large technology development tasks.
The committee boosted the sales targets of steel plates used by car manufacturing and oil pipelines and six other strategic products by 15 percent by securing technologies to make these products. The company decided to strengthen its global R&D network and expand the early vendor involvement activity.
The company also decided to seek ways to boost its productivity by developing technologies to turn out 34 million tons of steel and reduce production costs.
President Kang Chang-oh, in his overall statement, said that advanced steel makers would have increased their domination of the world steel market through mergers and by making their companies larger and BRICs countries with large growth potentials would make the job of securing raw materials difficult due to their rapid growth. Some steel products would face a glut situation. Under the situation, POSCO would have to increase its output of steel to strengthen market dominance and efforts to secure raw materials, while expanding its capability to produce high-quality steel products. "The steel maker is called on to switch rapidly to be ready to produce a high-quality steel products through a system to strengthen POSCO's technology development," Kang said.
The screen meeting linking POSCO headquarters in Pohang and Seoul with its overseas offices in Tokyo, and Beijing was conducted with President Kang leading the executives and managers heading marketing and facility investment divisions.
POSCO is set to unveil formally its corporate sustainability management as a true global enterprise.
The steel maker on Oct. 19 published its report on the corporate sustainability management endorsed by an outside organization for the first time for a domestic firm. The report spelled out its economic profitability, environmental soundness, and social responsibility in detail.
The report has been based on the firm's 2003 operational results, including its environmental policy, investment in environment facilities and social contribution activity.
Especially, the report has been made pursuant to international standards for making reports and companies including SAM Co., which measure the Dow Jones Sustainability Index(DJSI) and its details have been endorsed by Ernst & Young of Australia and its Korean partner firm, boosting its trust and correctness levels.
POSCO plans to distribute the report to evaluation organizations, investors, academics, non-governmental organizations, provincial organizations and other interested parties both at home and abroad to boost their understanding and trust in the company.
CSM (corporate sustainability management) is a new corporate paradigm to realize the new responsible role for corporations for the development of human beings through sustainable growth, taking into consideration all balanced points including economic profit, environmental soundness, and social responsibility.
POSCO has been pursuing strategies and policies to set up CSM as the basic idea for the company through its special task force team from April. The company plans to set up a system and organization to reach its objective by 2005.
Following its declaration of ethical management last year, the company plans to have CSM take an early root in the company and achieve a high profitability by building trust among diversified concerned parties and at the same time advance its social responsibility as a global enterprise.
LNM Group took over the International Steel Group (ISG) to bring its total steel making capacity to 60 million tons, showing the world its merger activity is increasing faster than expected.
According to releases by the group, the group will change its name to Mittal Steel at the end of this year and pay off $4.5 billion both in cash and stocks to conclude the merger. Chairman Wilber Ross who set up the ISG was interested in selling the steel maker after normalizing the bankrupt steel maker's operation when he took over the bankrupt steel maker.
On the other hand, LNM Group wanted to make sure that its hold on the steel plate market in America strengthened when it takes over ISG, whose products were competitive. ISG included bankrupt steel makers under Chapter 11 including Bethlehem Steel, and LTV and these steel makers recovered their competitiveness through restructuring.
When the take over of ISG is completed, Mittal Steel's steel production capacity would rise to 26.6 million tons, taking up 22.7 percent of total crude steel production capacity in the U.S. steel industry and 44.4 percent of the blast furnace steel industry.
If the capacity of U.S. Steel, the second largest blast furnace steel maker in America, is added, the group will control 76.7 percent of the steel making capacities of the blast furnace steel industry.
It appears that LNM is optimistic about the prospect of the world steel industry because ISG, cost containment, is not that competitive against steel products from developing countries, but it took over ISG regardless. For example, according to records provided by WSD, ISG's steel makers are in a inferior position against steel makers in the third world by 15 percent.
The overall profitability of U.S. blast furnace steel makers has been declining and is at a low level at the current time. For example, U.S. steel makers' average pre-tax profit rate recorded 0.2 percent of their sales revenue even in their heydays in the '90s(1991-2002), while Japanese steel makers averaged 1.5 percent and a world average of 2.7 percent.
LNM's take over of ISG is based on its optimistic outlook for the U.S. steel industry.
LNM's takeover of ISG will affect the U.S. steel industry and the world steel industry in many ways. First of all, Mittal Steel would take the lead in integration of global steel industry through restructuring. LNM is expected to secure the sales outlet for the giant U.S. steel market and it is also expected to raise its total production capacity to 100 million tons taking advantage of its global steel plants located in Europe, North America and Africa.
It also will lead the world steel makers to consolidate their operations to grow larger and integrate. Analysts in the steel industry are of the view that global integration of steel makers would speed up by the merger, giving birth to two or three steel makers with production capacity of 100 million tons each.
Such an integration of steel makers would upgrade their ability to set prices across the market with a positive effect on the world steel market as it would shut out excessive competition in the market and improve the supply condition of steel products.
On the other hand, the integration this time is likely to weaken the strength of the U.S. steel industry's international influence, with a large chunk of the U.S. steel plate industry, which can speak for the U.S. steel industry, has been sold to an overseas steel maker and Mittal Steel would now speak for itself only, not for the U.S. steel industry.
The last question is the large size of debt of Mittal Steel. As of the middle of this year, its debt level reached 1,044 percent by the Ispat International standard, raising concerns if the steel firm would be able to continue with its global integration without incurring financial burdens. nw