Taking on Brazilian Venture

Dongkuk Steel secures 10 pct stake in Brazil Project
Dongkuk Steel Co. signed a memorandum of understanding with a number of international companies including CVRD(Companhia Vale do Rio Doce) to build a slab plant in Ceara state in northeast of Brazil on May 24.
Joining the project along with Dongkuk Steel are Danieli, BNDES (Brazilian Development Bank) and BNB (Banco do Nordeste do Brasil).
The project which will cost some $750 million with the capacity to turn out 1.5 million tons of slab a year from 2007 with its construction slated to start in the second half of this year.
Dongkuk Steel is slated to hold a 10 percent stake in the slab steel mill and take charge of its operation and marketing the products. CVRD is slated to supply 2.5 million tons of pellet to the new slab plant a year, while Danieli will supply equipment to the new plant and share the charge of operating the plant.
Italian financial institutions are likely to finance $500 million of the cost in project financing. Dongkuk Steel is to import more than 50 percent of slab produced by the new slab plant from 2007 at prices cheaper than domestic prices, achieving the dream of owning a slab plant, which the company dreamed about for a long time.
Dongkuk has become a globally competitive steel maker with its investment in a steel plant in Brazil, one of the growing BRICs countries, following a long range planning since 2001. Its ambition is to globalize the company became a reality through an investment in one of the largest countries in the world with an expanding economy. Especially notable is the fact that its overseas investment has been realized through the project financing and Dongkuk will take charge of the operation of the new slab plant, taking advantage of its know-how accumulated in many years of its operation, which should be displayed before the world.
Dongkuk went a step further from global outsourcing to making a direct investment as a means of securing slabs of its own design and produced with molten iron produced by the new slab plant in Brazil from 2007. The steel maker will be able to expand its production of steel plates used in building ships, with a stable supply of slabs, which will make it competitive, thanks to the lower supply prices of stabs than international prices. Its price for steel plates will be very competitive.
Forbes Korea ranked Dongkuk in 32nd among its list of 200 companies leading the business community in Korea in its May issue. Its affiliate Union Steel came in at 78th place in the ranking.
Dongkuk became the third highest ranking steel maker after POSCO in third and INI Steel in 27th in the listing. In the order of sales revenue, Dongkuk ranked 36th, 33rd in assets, 25th in profit and 50th in market value.
The scale of the Dongkuk Group's assets came in at 26th based on rankings announced by the Fair Trade Commission and 11th among conglomerates with its assets totaling 5.8 trillion won.
The group's liquid assets holdings ranked 11th in the business community totaling 890 billion won.
In the meantime, the steel maker's operating profit in the first quarter amounted to 172.2 billion won, up 28.9 percent from a year earlier, while its sales in the first period amounted to 844.5 billion won, up 23.6 percent.
The company projects that its sales for this year would total around 3.6 trillion won, up 10.1 percent year-on-year, based on the first quarter sales record.
Dongkuk officials said the company's sales and profit increased a great deal due to increases in its product prices and the appreciation of the Korean won currency. The sale of its main product, steel plates, rose to 485.7 billion won, up 60.5 percent from the same period last year, boosting sales and profit figures.
The steel maker plans to produce 5.55 million tons of steel products this year including 2.48 million tons in steel plates, up 6.8 percent from the same period last year, steel rods at 1.89 million tons, and shape steel 1.18 million tons, with total revenue projected at 3.57 trillion won this year. nw

Dongkuk Steel Chairman Chang Se-joo shakes hands with his counterpart of CVRD after signing an MOU in Seoul for joint venture to build a slab plant in Brazil.