A half-century ago, POSCO was a just new ‘kid’ in the industry but now, the company proudly ranges with the world’s top steelmakers.

One billion. The number itself is remarkable, of course, but there are countless details the number alone can’t fathom. To dig deep into what it all means, POSCO Newsroom traces the footsteps that led to the one-billion record. POSCO Newsroom reports.

l The Footsteps that Created the Legend

After the first drop of molten iron on June 9, 1973, POSCO shipped out its first steel products on August 1 the same year. In 1981, the company saw the completion of phase 4 Pohang Steelworks construction, followed by the opening of Gwangyang Steelworks in 1983. In 1989, POSCO achieved the cumulative crude steel production of 100 million tons. POSCO completed all construction work of then Pohang Iron and Steel Company in 1992, thereby increasing annual crude steel production capacity to 21 million tons. Since then, POSCO saw a steady increase in its production capacity, leading to the current annual production of 37 million tons of steel.

In 1994, POSCO achieved the crude steel production of 200 million tons. In the same year, the company also was listed on the New York Stock Exchange (NYSE) before any other Korean company. In 1998, POSCO’s production shot through 300 million tons, followed by 500 million tons in 2005. 2005 also marked the first year POSCO made the DJSI list for its sustainable management practice.

* DJSI Dow Jones Sustainability Index:
Launched in 1999, the DJSI evaluates a company’s sustainability performance — it’s the longest-running global sustainability benchmark worldwide and has become the key reference point in sustainability investing for investors and companies. The DJSI assesses various issues including corporate governance, climate change mitigation, and labor practices reflecting the trend to reject companies that do not operate ethically.

In 2011, the year when the cumulative crude steel production broke 700-million mark, Pohang No.1 furnace was selected as Korea’s economic National Treasure No.1 by domestic media. The company went on to received the prestigious $10 billion Export Tower award in 2017 — and finally this year, shortly after its selection of global lighthouse factory, POSCO achieved a cumulative steel production of one billion tons. The year 2019 is also the tenth year POSCO came in the top of the WSD competitiveness ranking, solidifying its stature as the No.1 steelmaker. In each year towards POSCO’s steady race to one billion, POSCO left marks of growth, both big and small.

The one-billion production was not an event created overnight. It was a long, arduous and enduring process holding the heart and souls of people in and out of POSCO communities.

l Tracing One Billion POSCO across Products

Tracing POSCO steel across different product categories —such demand industries as automobiles, construction, industrial machinery— the hot-rolled steel was the most sought-after, with 330 million tons in sales volumes.

Cold-rolled steel came in second — altogether 270 million tons were sold. This product line includes many high-end products such as GIGA STEEL and PosMAC, etc.

What about thick steel plate? As an indispensable product for Korea’s industrial development, 140 million tons of thick steel plate was produced. As for stainless steel, POSCO produced 71 million tons. In addition, POSCO produced 42 million tons of wire rod, which acts as a bridge cable, etc. POSCO also produced 140 million tons of other products which include slabs and blooms sold to other steel companies such as rolling mills.

l One Billion POSCO Went to…

POSCO Newsroom zoomed in on the demand industries to which POSCO steel was sold for the past ten years. With 340 million tons of steel sold across industries, the auto industry and construction sector (including machinery and pipes) took 83 million tons each. The shipping industry took another 29 million tons, whereas the electrical and electronics sectors took 22 millions. 120 million tons went on to be utilized for pressure vessels, re-rolling, surface treatment, distribution, etc. To grasp what this series of numbers in millions, let’s convert these sales volumes into one billion tons of crude steel production.

50% of one billion tons were used in the automotive and construction sectors, amongst which about 250 million tons were sold to the auto industry. Presuming a midsize car weighs one ton, this means POSCO steel produced 250 million cars.

What about the construction sector? 250 million tons can raise 4,910 Lotte World Towers.

The shipbuilding industry took another 10% — 86 million tons of steel which can build 2,392 VLCCs (Very Large Crude-Oil Carriers) each weighing over 300,000 tons. The electrical and electronics sector used 64 million tons of steel which can make 6.4 billion refrigerators for household use.

The above numbers mean much more than the sheer scale of POSCO’s steel production. What they show is the fact there had been sustainable demand for steel, and that the growth of Korea’s key industries coincided with the fate of POSCO.

As Korea’s industries became more sophisticated and advanced, so did the country’s economic power. As the above graph demonstrates, both the historical data of Korea’s GDP and POSCO’s steel production are heading towards the same direction.

In 1973, when POSCO first produced crude steel, Korea’s GDP stood at $13.9 billion. In 2018, at the cusp of the one-billion mark, Korea’s GDP shot through the sky with 1.6 trillion, 116 times that of 1973. With the development of Korea’s downstream industries, the country’s economy advanced — so did POSCO.

As POSCO runs towards the next billion, POSCO’s unwavering support for Korea’s key industries and the global community will continue.

Cities like Hanoi are expanding at an increasing rate. (Source: Channel News Asia)

Urbanization is also speeding up growth. By 2030, more than 10 million people will reside in Ho Chi Minh City. Not only demographically, Vietnamese urban areas are getting bigger physically, with a spatial expansion rate of 2.8 percent per year, which is faster than any other urban area in the Southeast Asian region. The growth is stimulating demand for new homes, roads, infrastructure as well as labor.

As a result, the country is already the biggest steel consumer in the region, driven by a strong construction industry and abundant FDI.

Foreign Direct Investment

During the record-breaking year of 2017, Vietnam saw registered FDI increase 44 percent YOY, and exports rise 23 percent. The majority of investment came from nearby countries such as Korea, Singapore, Japan and China, where the cost of labor is much higher than in Vietnam. Plus, of the country’s 92 million people, 60 percent are of working age, and have demonstrated high output levels. Thus, loads of manufacturing jobs are being offshored to Vietnam.

For example, Korea’s Samsung Display invested USD 2.5 billion in Vietnam last year, bringing total investments to USD 6.5 billion for the production of their display products. Polytex Far Eastern, a Taiwanese company, also invested USD 490 million for their yarn factory in Vietnam. With the continued flow of FDI, the country’s economy is reaping the benefits in terms of financial gain as well as developments in infrastructure.

Foreign Investment has created many jobs for Vietnam’s workforce, such as the workers above in a Samsung Factory. (Source: VN Media)

Two metro projects are under way in Ho Chi Minh City and Hanoi, both funded by foreign companies. Ho Chi Minh City’s Ben Thanh-Suoi Tien line will run through the city at a length of 19.7km, and is planned for completion in 2020. Most of the funding comes from Japan International Cooperation Agency (Jica), Japan’s Sumitomo Corporation and Shimizu-Maeda.

In Hanoi, the 13km Cat Linh-Ha Dong line is mainly supported by China Railways Sixth Group along with a consortium of other Chinese companies, and is scheduled to open for operation in 2018. Such major infrastructural upgrades will further boost the cities’ efficiency and create a better living and business environment.

A Strong Construction Industry

With FDI stimulating the economy and creating jobs, the Vietnamese are enjoying higher living standards and searching for homes in or near major cities. The growth of the middle class and urbanization have led to a booming construction industry.

According to POSCO Research Institute, Vietnam’s construction industry made up 33.3 percent of total GDP, with an 8 percent growth in 2017 alone. Moreover, the industry is projected to grow at an annual rate of 7 percent for the next 10 years. As a result, Vietnam’s construction industry is driving the nation’s steel demand. From 2011 to 2016, Vietnam’s steel demand grew by an average annual rate of 18.1 percent, the highest of Southeast Asian countries with the Philippines in second place at 13.6 percent and Thailand following behind at 5.7 percent.

Vietnam has seen the most rapid growth in steel demand in the region. (Source: SEAISI 2017)

With more and more homes and public infrastructure being built, Vietnam’s construction spending has grown at a CAGR of 8.5 percent and construction steel accounts for more than 93 percent of steel demand in Vietnam. Of those figures, structural steel demand is expected to make up 80 percent of the country’s entire steel demand, reaching 24 million tons by 2020. In comparison, the construction industry is accountable for 65.3 percent of total steel demand in Indonesia and 59.7 percent in Thailand, two of the biggest economies in the region.

Vietnam has one of the fastest-growing construction industries in the world. (Source: SEAISI 2017)

Currently, Vietnam’s domestic steel production capacity only meets 40 percent of its demand, meaning companies must secure stable, high-quality supplies of steel to match its growing demand.

SEE ALSO: Top 5 Steel Consuming Regions in 2018 and Beyond

POSCO’s Solution Marketing

For steelmakers like POSCO, Vietnam holds numerous possibilities for new partnerships and cooperation with construction companies. POSCO has been working closely with its partners in Vietnam for years, supplying premium products as well as supporting partners with technical and marketing solutions. POSCO also chose to open its first overseas structural steel solution center in Vietnam early this year at  POSCO SS VINA.

SEE ALSO: POSCO Opens its First Overseas Structural Steel Solutions Center in Vietnam

POSCO CEO Ohjoon Kwon (center) during a visit to POSCO SS VINA last year. (Source: POSCO SS VINA)

The center is composed of 3 main departments: Solution Planning, Solution Development and Technical Services. Due to the influx in demand for structural steel, the solution center will develop customized marketing strategies fit for the local market, and 25 experienced construction experts will provide support for projects using POSCO’s steel.

As Vietnam eyes another year of growth and development, POSCO SS VINA also looks forward to a busy year providing material and technical solutions for domestic construction projects that will play a vital role in Vietnam’s economic and social well-being.  

Cover photo courtesy of Smithsonian.

Prime Minister Modi revamped India’s economy with his “Make in India” initiative. (Source: LinkedIn)

Most notably, Prime Minister Modi launched the “Make in India” initiative in September 2014, showing his resolve to revamp the manufacturing industry in India. Under the initiative, domestic as well as foreign companies are encouraged to manufacture their goods in India with the goal of increasing the makeup of the manufacturing industry to 25 percent of GDP by 2025.

At the heart of the initiative is the government’s efforts to ignite the steel industry. The National Steel Policy (NSP) 2017 declared that India will become self-sufficient on domestic steel supplies by increasing its steel production capacity from 122 Mt in 2015 to 300 Mt in 2030. However, the steel industry currently only makes up 1.04 percent of the country’s GDP.

Challenges Ahead for India’s Steel Industry

Despite India’s promising potential and robust government support, the steel industry has not met the government’s high expectations and growth has been modest. According to researchers in volume 4 of the Asian Steel Watch, there are deep structural flaws within India’s steel industry that need to be addressed before the country can reach its full potential.

One of the industry’s biggest challenges is its growing debt – In 2016, the steel industry surpassed INR 3 trillion in debt. Most of the country’s steel and infrastructure projects are financed by the government. What India needs is more private sector involvement, but private players are hesitant due to complex regulations, a lack of business models and no guarantee on returns on investment (ROI). The government has also been slow to secure FDI because, over the years, India’s steel industry has displayed poor planning and management of projects as well as a mismanagement of funds.

India’s mining industry will directly affect the success of the steel industry. (Source: Pinterest)

Another major challenge has to do with India’s natural resource management, as mining companies do not have fair access to the country’s abundant resources. The mining industry is subject to heavy tax burdens including the royalty, local area development tax, forest development tax and much more as it is a profitable business for the government. Plus, the costs of meeting international environmental standards are passed directly onto mining companies. Thus, the price of iron ore and other minerals do not reflect the abundant supplies available, and the higher prices ripple into the steel industry.

Moreover, the government regards the steel industry as the backbone of India’s economy, but in reality, the times are changing.

Technological advances in the manufacturing industry is making the steel production process more efficient and less labor intensive. (Source: South China Morning Post)

In the past, 70,000 workers were required to produce 1.5 Mt of steel. Today, it takes about 3,000-4,000 workers to make 5 Mt a year. The steel industry is just not what it used to be in terms of the positive effects it had on the economy as a whole. The industry requires intensive capital and the only way it will survive is with low labor costs and maximum manpower productivity.

India needs to take full advantage of the country’s abundant resources and capitalize on its competitiveness to reach its full potential. In order to do so, India can start by examining other steel industries that served as the main driver for national economic growth, such as Korea’s.

Takeaways from Korea

After the Korean war in 1953, Korea had to build its economy up from scratch. Like India, the government chose to stimulate its steel industry and spent its war reparations payment from Japan to build POSCO’s steel mill in 1969. Since then, the state-led steelmaker has been a primary engine for Korea’s miraculous economic growth.

The construction of POSCO’s headquarters began in May 1968.

So how did Korea manage such growth?

The government allocated much of its resources to infrastructure construction for efficient logistics and implemented policies to support the mutual growth of steel and steel-consuming industries. Moreover, the government practiced protectionist trade policies long enough to get Korea’s steel business on its feet, then supported a market-driven business model.

The government also kept a close watch on supply and demand forecasts and updated its supply policies timely and accordingly. Factors such as demographic changes, industrialization patterns, urbanization and labor costs should be examined holistically to prevent the gap between supply and demand from increasing too much. For example, in 2010, the Korean government implemented capacity expansion policies that resulted in oversupply and a prolonged recession. This was because policymakers failed to diagnose the symptoms of the mid to long-term steel demand forecasts that showed sluggish demand. Since then, Korean policymakers keep close watch on such measures to update the country’s supply policies.

Finally, the Korean steel industry invested heavily in knowledge accumulation and R&D to wean off of Japan’s technical support and become an exporter of steel technology.

POSCO is now a leader in steel production technology.

Compared to Korea, India has an advantage in almost every aspect. The country’s per capita steel consumption is still low and the booming population will drive demand in steel-related industries. With much room for growth, the Indian steel industry can expect to see accelerated growth when paired with the right policies and government support.