POSCO
to Diversify Operations

Chairman Lee seeking to invest in new areas of businesses such as energy, fuel batteries, information communication

POSCO Chairman and CEO Lee Ku-taek, in his New Year's speech, said POSCO has accomplished much last year, fulfilling all of its growth potential expanding its operations to India over Vietnam, and to Mexico, while completing another stainless steel plant in China. POSCO has turned around its operation as a high-grade steel maker and has been able to save some 1 trillion won in costs, building a high value-added and low cost production structure.
At the same time, the company has been in search of opportunities to diversify its business, other than steel-making such as energy, construction and information communication, in addition to magnesium, fuel batteries and the company expects to reap very good management results for last year amid difficult management environment.
The POSCO chairman said he would like to thank all of 34,000 officers and employees of the company for their hard work and passion for their jobs.
But this year, we expect to face many problems like the steep appreciation of the Korean currency,
high oil and real estate prices and North Korea's nuclear threat tough risks to our operations, he warned. He said the steel industry is faced with rapid changes in competitive paradigm including the M&A fever last year that created a 100 million ton production steelmaker is expected to remain strong this year, too. It is a matter of time that China will have a steelmaker bigger than us helped by the Chinese government's strategy to make its steel makers bigger, while Japanese steel makers are not far behind in expanding its production volume, not just producing high-quality steel.
Prices of iron ores have been continuing to rise year after year so high to the extent that steel maker rankings would now depend on whether they have their own iron ores mines or not. Competition to secure iron ore mines and steel markets around the world is likely to heat up as the year wears on.
One sure way to combat the situation is that all of our affiliates would grow to be global companies. They have to raise sights for reform and growth targeting at becoming world-class firms and create a pan-POSCO synergy to a maximum degree.
First, we have to strengthen corporate structure by cutting costs and raise higher value-added portions to secure top global level competitive strength.
We have to strengthen further research on strategic products, innovative production process, and basic technology and set up as early as possible mass production system for high-grade steel, and quality management system. We ought to meet customers demand for brand-name products that customers'want by switching our production system to that based on quality priority system in daring manner.
In particular, we have to complete the installations for Finex production process, which is known worldwide without a hitch and boost POSCO brand-name value in the world.
Second, we have to spur our investment in global steel production plants, to secure future profit. We have to complete our Indian steel plant complex project with the passion that we had when building POSCO steel complex in the past. We have to finish the various issues basic to the project including the preparation of sites so that the construction can be launched from early 2008. We have to take advantage of our cold-rolled steel plants in Vietnam and Mexico to secure and expand our share in world steel market and continue to look for chances to make investments in the world, which means that we have to continue to expand our investment in the growing market in China and raw materials overseas to boost POSCO to rank the third largest steel maker in the world. Third, the CEO went on to say that POSCO and its affiliates should expand their growth and together search for new growth engines from this year as its initial year. This year will also be the initial year for joint effort by POSCO and its affiliates to connect their management together like one business unit to work for the common vision and strategy in a bid to maximize their synergy by boosting the effectiveness of decision-making.
Under this strategy, we ought to settle effective management over such matters as drawing up strategies, result management and IR activities to take a deep root in our operations. At the same time, we have to expand the growth bases of the affiliates and continue to look out for new sources of income to depend our future growth on. The POSCO chairman said now is the time to create a new myth as POSCO had done in its operations in the global stages so that a global POSCO can be created with an open culture as the base. nw

POSCO Chairman & CEO Lee Ku-taek.
Chairman Lee delivers a speech at the New year ceremony held at its Pohang plant.