POSCO on the Move
Steelmaker to open subsidiary in Johannesburg to kick off its search for natural resources in Africa
POSCO will step up its advancement into Africa by setting up a wholly-owned subsidiary in South Africa in January and, for this purpose, Chairman Chung Joon-yang has decided to visit Africa first in his overseas travel schedule for 2011 in a bid to secure natural resources.
On his week-long African trip, he will also visit other countries on the Dark Continent including Zimbabwe, Ethiopia and others. The POSCO chairman last visited Africa in June of last year.
Chung will make sure that the steelmakerOs first subsidiary in Johannesburg will be a base for its advancement into Africa to secure natural resources. POSCO has a liaison office in Cairo, Egypt, and no subsidiary as yet in Africa.
POSCO officials said for POSCO to be an integrated natural resources enterprise, AfricaOs abundant natural resources and its market are very important and the steelmaker will focus on such precious minerals as chrome, tungsten, manganese, molybdenum and lithium, among others.
Chung will also visit the operations of the Kalahari Manganese Mine in which POSCO holds a 13 percent stake. In Zimbabwe, he will look for opportunities for securing a key raw material for ferro silicon, which is an alloy product of iron and silicon and is used to remove oxygen residue in crude ingot.
POSCO has been in operation in Africa since signing an MOU in the 1990s to set up Poschrome to get into the African market. In May, the steelmaker took over a stake in the Lebubo coal mine in Mozambique, as POSCO considers securing raw materials in Africa critical to its plan to become an integrated energy and steel company.
POSCO has been eyeing such countries as Mauritania, Guinea and Liberia, rich with iron ore yet to be tapped, ever since the steelmaker developed the Finex steel production method, which can use low-quality iron ore thus making the securing of iron ore in those countries more critical.
One of the most pressing problems that POSCO has is securing a self-sufficiency ratio for raw materials, iron ore in particular, of 50 percent. It is working to solve this issue by continuously seeking stakes in iron mines overseas, Africa in particular.
The company plans to take advantage of Daewoo International's vast international network with offices in eight key cities, including such key locations as Cairo, Algeria, Nairobi, Johannesburg and Tunisia. POSCO took over Daewoo International last year and held a strategy meeting with officials of Daewoo International last December to synchronize their operations. The meeting centered on discussion of their cooperation in securing raw materials in Africa and in the Far East, Mongolia in particular. The two affiliates launched a consultative council in which key officials of the two companies would meet to discuss overseas operations and they agreed that POSCO will take charge of investments and securing raw materials while Daewoo International will take charge of the development of raw materials to control traffic between the two affiliates.
The two companies even plan to build various infrastructures in Africa including railroads, harbors and power plants in which more affiliates such as POSCO E&C and POSCO Power will participate.
In the meantime, the Myanmar gas project led by Daewoo International is moving forward, as the POSCO affiliate plans to start developing gas resources at the country's A1 and A3 offshore blocks as early as May 2013.
A group of officers from the Ministry of Knowledge Economy visited Myanmar at the end of December to attend the Korea-Myanmar collaboration committee for natural resource exploration. During the visit, the two parties agreed to strengthen their ties to explore and commercialize the gas resources in the offshore blocks together.
The Myanmar gas project, which is backed by the two countries' governments, is one of Daewoo's key projects. The company owns 51 percent of the shares in the two blocks.
Besides Daewoo, India's National Natural Gas Clearinghouse (17 percent), Myanmar Oil and Gas Enterprise (15 percent), Korea Gas Corporation (8.5 percent) and India's Oil and Natural Gas Corporation (8.5 percent) are participating in the project as shareholders.
It is estimated that the two offshore blocks have between 4.5 and 7.8 billion square feet of natural gas. Once the production begins, the gas blocks are expected to produce 500 million square feet of natural gas every day for 30 years.
The gas resources will be sold to CNUOC, an affiliate of the China National Petroleum Corporation, for which the two parties plan to connect gas pipes from Myanmar to inland China. The plan, up until now, has been managed successfully in terms of finance.
Daewoo International is currently investing $4.7 to $4.8 billion in Myanmar, and its business partners are sharing the financial burden with the company relative to its investment.nw