In particular, through the recent zero-tariff measures taken among ASEAN Economic Community (AEC) member states and the Thai government’s push for more eco-friendly cars, the market is expected to see high growth potential with an expanded annual production capacity of 2.8 million by 2020.

POSCO TCS is positioned to take advantage of Thailand’s growing auto market.

Due to the growing auto market in Thailand, demand for automotive steel is also on the rise. Thai car makers all prefer to receive materials from local suppliers, so steel companies have begun building subsidiaries in the area.

POSCO TCS Opens in Thailand

In August of last year, POSCO TCS opened near Bangkok with a production capacity of 450,000 tons. With a local supply facility in Southeast Asia, POSCO can provide steel to automakers and parts manufacturers at more affordable rates and with higher quality control.

Chotika Arusawat (Procurement, left) explains the tax benefits for locally produced steel at POSCO TCS.

Chotika Arunsawat in the Procurement Department noted that “If automakers in the Southeast Asian region import POSCO steel from Korea they need to pay over 17% in taxes, but with POSCO TCS, they pay 0%. Also, the nearby Laem Chabang Port is one of the busiest container ports in the world making shipments to Malaysia, Vietnam, and Indonesia quick and simple.”

Having a local facility allows POSCO to build stronger strategic partnerships by smoothly supplying materials to global automakers and parts manufacturers in one of the largest car markets in the world. Narisara Im-Tua, who works in the Sales Department, told us that 85% of the steel products coming off the line were going to car makers and auto parts manufacturers, making POSCO TCS one of the largest steel suppliers in the region.

POSCO TCS is Defined by Superior Quality & Service

The plan to develop POSCO TCS began in 2011 with construction starting in 2014. When POSCO TCS went online in August 2016, other steel companies had already entered the market. However, POSCO is using its strategic advantages in production technologies, automotive steel expertise, and advanced production facilities to gain an upper hand.   

POSCO TCS President Lee Jin-soo says he is optimistic about the future of POSCO TCS in Thailand and the Southeast Asian.

In a recent interview, POSCO TCS President Lee Jin-soo noted that “POSCO is currently implementing systematic technology support with knowledge gleaned from other automotive steel facilities in Mexico, Indonesia, and China. Although other companies may have a head start, the future for POSCO TCS is looking bright due to our superior facilities and higher quality.”

To be a leader in the Southeast Asian region, POSCO TCS realizes it must manufacture superior products and offer better service than its competitors. Lee emphasized that POSCO TCS is “competing in the same industry to serve the same clients alongside some of the world’s best. Every employee at POSCO TCS must be devoted to securing a competitive advantage in all aspects of business.”

When asked how POSCO TCS can compete with other steel companies that have been in the region longer, Narisara Im-Tua stated matter-of-factly, “Because our quality is so high.” She added that POSCO TCS sends samples to Korea every 1-2 weeks for quality certificates and because of their consistently high-quality ratings, automotive customers are very happy.

Piyakun Boonmee (HR) explains POSCO’s commitment to quality for its customers.

Piyakun Boonmee in HR recounted the story of when a customer called Sales about a product that was not fitting in with their production process. The Sales Department reacted immediately, sending the Customer Service Department to the customer’s facility to check the product and production line. POSCO came back and worked to fine-tune the product so that it fit the customer’s specific production needs.

Boonmee stated that POSCO TCS customers “can contact our Customer Service Department at any time if there are any perceived quality issues. Our Quality Control Department will go directly to the customer’s factory to check the product and the production line. We work together with the customer to fine-tune the product until we are sure it meets the customer’s needs.”

A Culture of Trust & Leadership

We asked employees how POSCO TCS could maintain such high standards and quality for its products while also building strong relationships with its customers and employees. The most common response was about the healthy working environment.  

President Lee Jin-soo told us that “If you are respectful and considerate of everyone, employees are better able to work together and build a great product – regardless of cultural barriers or where they are from. For better performance, we empower them with training and the skills they need to succeed and we take care of any issues with respect.”  

Also, at POSCO TCS each employee is provided with 30-40 hours of training per year. These classes include everything from leadership and communications to learning Korean.

Everyone agreed that POSCO TCS was a great place to work, making it easier to work together for the customer.

When asked what it was like to work at POSCO TCS, Piyakun Boonmee said, “At POSCO TCS we are like a family and it is a happy place to work. Even though we work in separate teams, we are not separate, we work together for the customer – always striving to learn more and do better.”

Boonmee added, “In the future if we continue working like a family, we will be the #1 company in Thailand. After that, we’ll be number #1 in Southeast Asia. And we all share that goal.”

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In addition to working as a sales engineer in Indonesia and Singapore for two years starting from 1993, Lee was also in charge of establishing technology strategies for automotive steel sheets as well as producing Tailor Welded Blanks (TWB) at the Gwangyang steel mill. Already equipped with knowledge of cold rolled steel products and automotive steel plates, Lee was able to build two manufacturing centers in Mexico, POSCO-MPPC plant 1 and POSCO-MPPC plant 2. He made big contributions in stabilizing the plants during their early stages while working as the Director of Production for CGL (Continuous Galvanizing Line) 1 and 2 in Mexico, which was POSCO’s very first overseas construction.

Lee, who has successfully completed the construction of Thailand CGL last May, said, “I would like to compete in the Southeast Asian market with our unique POSCO style.” POSCO Today had a chance to speak with Lee directly and hear about his goal of creating the best CGL in Southeast Asia, specifically through taking full advantage of POSCO employees’ work capabilities.

What is the background behind the construction of Thailand CGL and what are some of its expected outcomes in the future?

Thailand has not only positioned itself as the base for the automotive industry in Southeast Asia, but it is also known as the center of the manufacturing for products like home appliances. Speaking of the automotive industry, Japanese automobile companies, which entered the Thai market during the 1960s, currently occupy over 90% of the total automobile production, and these companies all share a demand to receive material supplies from local suppliers. In order to meet such needs and to expand the market further, Japanese steel companies, such as NSSMC and JFE, have entered the Thai market and have been operating CGLs since 2013.

POSCO, which provides around 150,000~200,000 tons of galvanized steel sheets to Thailand every year, has also entered the Thai market in order to provide stable supplies for its existing clients and to further expand the market. This will be accomplished through fulfilling localization needs for the material supply and demand of the Southeast Asian clients, and responding proactively to the recently heightening commerce regulations.

Moreover, with the launch of the AEC (ASEAN Economic Community) last December, it is expected that POSCO will be able to provide an extended supply of its high-quality plating materials to even intra-regional countries such as Vietnam, Indonesia and Malaysia.

What differentiates POSCO’s technologies and products from those of Japanese and other international companies?

Although NSSMC and JFE have been operating CGLs since 2013, they are still facing some quality issues. This is not because Japanese steel companies fall behind in terms of their technology, but because of their lack of global experience and inadequate ability in operating overseas production corporations.

POSCO, however, is currently implementing systematic technology support at a favorable time, based on the CGL operation know-hows learned from previous CGL locations, such as Mexico, Indonesia and China. POSCO is also working to standardize operation methods in more detail for employees. Although POSCO may not have been able to get a head start in terms of operating CGLs, the future for POSCO is looking bright from facility and quality aspects.

Tell us about POSCO’s unique marketing strategy in the Southeast Asian market, including Thailand.

Thailand CGL was established in order to stably produce automotive steel sheets and to provide highly competent materials to regional clients. Prior to providing automotive steel sheets, however, a quality certification from each automobile company is required, which usually takes about 1.5~2 years.

Therefore, until quality certification is acquired, POSCO plans on creating profit and expanding its contract base through differentiating the quality of GI products for home appliances and painting, areas in which our competitors are having a hard time producing for.

There is also a number of small local automobile companies in Thailand. These companies do not have an established material buying channel, and they cannot even attempt to establish a relationship with a large steel company like POSCO due to their outdated technology. POSCO, therefore, plans to provide manufacturing technologies, such as mold technology, and automotive steel sheet buying channels for these small local companies through Thailand CGL, which will also allow POSCO to expand its contract base based on a solution marketing system.

What is your plan in terms of creating a synergy with local employees?

No one should be treated differently, no matter where you are from. By all means, standards for employee management should not differ by one’s country or region of origin.

If you are respectful and considerate of others – local employees, that is – synergy among the employees will be maximized regardless of their nationality or region of origin. As long as every employee works with a strong sense of vocation for working at the best steelmaking company, the outcome is going to be successful. For better performance, problems faced among people should be resolved through humane respect and care, while their working styles should resemble that of POSCO’s.

Lastly, what is the ultimate goal of Thailand CGL? And, do you have any final words?

Thailand CGL must compete in the same industry, serve the same clients and compete with the same galvanized steel sheet products as the Japanese steel companies, which are known as the world’s best within the industry.

Every employee at Thailand CGL will be devoted to securing a comparative advantage in advance in all aspects, including quality, facility and corporation operation, and be able to write a POSCO success story in Thailand.

POSCO continues to strive to maintain its role as a leader in the steel industry, integrating into the Southeast Asian market seamlessly through producing premium products for the automotive industry while utilizing their global expertise. Lee is determined to make Thailand CGL a success, and he believes that with the help of POSCO’s dedicated employees and the company’s competitive edge over other major steel producers, this goal can soon become a reality.

POSCO Holds Completion Ceremony for Thailand CGL, Southeast Asia’s First Automotive Steel Sheet Plant

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However, steel production in China has expanded even faster, pushing down prices in Southeast Asia and threatening regional competitiveness. In response, many governments are increasing trade barriers, as they look to protect their individual steel industries from a glut of competition.

Market Trends

From 2009 to 2014, the six leading countries of Southeast Asia—Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam—increased their production of hot-rolled steel products by 12.6 percent to reach 27.5 million tonnes per year.

However, the growing economies around the region meant that steel demand increased even faster. Over the same period, apparent steel consumption leapt 56.9 percent to 65.9 million tonnes. The difference was made up by imports, which nearly doubled to 46.4 million tonnes from 24.3 million tonnes.

Despite an economic slowdown affecting much of the world, the International Monetary Fund is predicting further growth for the region, expecting steel consumption to rise to 80 million tonnes by 2020.

To fill that gap, the major steel-producing economies of Korea, Japan and China have increased their exports. POSCO opened Krakatau POSCO, the first integrated steelworks in the region, in 2013, and now has production facilities and service centers in Malaysia, Vietnam, Myanmar and Thailand. As of 2014, steel companies from Korea, Japan and China comprised 80 percent of all imports to those six Southeast Asian countries.

In particular, China is making major inroads in the region, especially as its domestic economy slows and companies look to make up the difference abroad. In 2009, China comprised 12 percent of steel imports to those six Southeast Asian countries, but by 2014 that share had climbed to 42 percent.

The oversupply of steel can be seen in prices. Chinese hot-rolled coil cost $429 per tonne in early 2015, but that price fell to just $270 per tonne by October. Japanese hot-rolled coil similarly fell from $480 per tonne to $307 over the same period.

Rising Protectionism

With international steel supplies up and prices falling, Southeast Asian countries are responding by protecting their markets.

Trade barriers being enacted around the region include traditional protectionist measures (like tariffs, anti-dumping regulations and safeguards), technical barriers to trade (or TBTs) and non-tariff barriers to trade (like “Buy National” campaigns). For example, Indonesia enacted a “New Trade Law” in February 2014 that enabled the government to restrict imports of certain goods, including steel.

Anti-dumping (AD) duties and safeguard actions are especially on the rise. Over just 2013-2014, the six Southeast Asian countries took 33 anti-dumping measures, as opposed to 52 AD measures in the previous 18 years. Malaysia and Vietnam, which never took any AD measures from 1995 to 2012, took seven and four AD actions respectively from 2013-2014.

TBTs on steel imports are also tightening around the region. Indonesia requires certificates of approval to import hot-rolled, cold-rolled, coated, galvanized steel and long products, and the list is growing. Thailand, too, has made its approval process more complicated for certain imports, and Malaysia requires certificates of approval for certain steel products.

Finally, “Buy National” policies are common around the region. Indonesia changed its National Procurement Law to mandate government-procured products contain at least 40 percent domestic raw materials, while Malaysia and Brunei offer special benefits to government bodies for procuring domestic goods and services.

Uniting the Region

At the end of 2015, 10 countries in the region came together to form the ASEAN Economic Community (AEC), intending it to grow into an Asian version of the European Union. Containing 620 million people and a combined GDP of $2.5 trillion, the AEC has four major goals:11o build a single market and production base,

1. To become a highly competitive region,

2. To achieve equitable economic development, and

3. To fully integrate the region with the global economy.

4. Analysts believe that the AEC, while bringing the region closer together economically, may further strengthen protectionism against countries and companies from outside the region.

In light of these trends around Southeast Asia, experts say outside companies need to be cautious when investing in this region, and partnerships and joint ventures with local steelmakers are recommended. But with investments going on in the steel industry in Southeast Asia, particularly in Vietnam and Indonesia, soon domestic production could be on the rise, too, replacing many of the imports.

Oversaturation is always a risk, but, given the growth potential of this market, Southeast Asia is still considered a good region for investing. However, care is highly recommended, as the competitiveness of the steel market around the region is expected to rise, especially with the further development of the AEC.

Related Link:

The Future of Manufacturing in Korea

China’s Era of New Normal and its Implications on the Steel Industry

The Evolution of the Steel Production Process

The Myth and Reality of Global Steel Overcapacity

POSRI Releases First Edition of Bi-Annual English Journal “Asian Steel Watch”

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This marked the first time in 40 years that POSCO began producing molten iron overseas since its first effort on Yeongilman Bay in Pohang. POSCO’s 40 years of devotion to steel has begun to make its appearance overseas.

Approximately 500 employees and government officials of both countries attended the ceremony. These attendees included the Indonesia president Yudhoyono, the head of Indonesia’s Ministry of Trade Hidayat, the Vice Minister of  Korea’s Ministry of Trade, Industry, and Energy Kim Jaehong, Korean Ambassador to Indonesia Kim Yeongseon, ASEAN Ambassador Baek Seongtaek, POSCO CEO Chung Joonyang, Krakatau President Irvan, client companies, construction companies, suppliers, external partners, and regional representatives.

In his congratulatory speech President Yudhoyono said, “I anticipate that Krakatau POSCO’s steel products, manufactured at these cutting edge facilities will both satisfy steel demand in Indonesia, and greatly contribute to economic growth and job creation.”

CEO Chung said, “The past 30 months of integrated steelworks construction was not an easy journey, but we have succeeded with the strength of Korean technology and Indonesia’s excellent manpower. Just as POSCO’s philosophy of serving its home country by the means of steel production became the basis for national economic development in Korea, I am certain that Krakatau POSCO will serve Indonesia in the same capacity.”

Krakatau POSCO was jointly established by POSCO and Indonesia’s state-run Krakatau Steel at a share ratio of 7 to 3, and boasts iron making, steelmaking, and steel plate production facilities. The company is capable of producing 1.8 million tons of slab and 1.2 million tons of steel plate.

Krakatau POSCO plans to reach positive operating profits in 2014, its first year of operation, through proactive market development and low-cost production technologies. The company will proactively secure sales networks in the domestic market where prices are higher than exports, and sell 1.5 million tons of slab and 600,000 tons of steel plate in Indonesia.
The company also plans to secure competitiveness in its early stages, through innovative cost reduction activities such as utilizing POSCO’s unique production technology which can employ low grade materials, and thus gradually utilize Indonesian steel ore in place of costly imported steel ores.

Over the course of the integrated steel works project, the POSCO Family companies in each field, including construction, power generation, and IT, gathered together to mark a new milestone in overseas steelworks construction. When the Pohang Steelworks was first built 40 years ago, POSCO had to solely rely on overseas technologies but it can now construct overseas steelworks on its own.

POSCO E&C was responsible for overall engineering and construction of the integrated steelworks including iron making, steelmaking, and steel plate production facilities, while POSCO Energy was in charge of constructing a steam power plant. POSCO ICT established the EIC engineering and IT integrated system, while POSCO CHEMTECH supplied a processing facility producing limestone furnace and coke byproducts. POSCO M-TECH built a factory to produce aluminum deoxidizers, necessary for molten iron production. Daewoo International will support overseas exports and domestic sales of the steel materials produced in Indonesia, as well as new resource development in Indonesia.

In addition, 248 Korean small and medium sized companies participated in the construction of the Indonesian integrated steelworks, setting an example for win-win cooperation between large scale and small and medium sized companies. These small and medium sized companies were thus enabled to be involved with advanced steel facilities and global capabilities via POSCO.

The necessary equipment for the steelworks was provided by 222 small and medium sized companies, including Taechang Machinery which provided equipment to custom cut steel plates according client requirements, and Hyundai Mechanic & Electric which provided electric power receiving and distribution facilities. Overseas on-site construction was carried out by 26 companies, including Dongjin and Daeah E&C.

Indonesia makes up a large market, with a population of 250 million, maintaining an average annual growth at 6%. The market has excellent steel consumption potential, as 12.5 million tons of steel are necessary for economic growth. However, Indonesia has mostly relied on imports, with annual steel consumption per person of 50kg, less than one-twentieth that in Korea. There are no quality and cost competitive steelworks in surrounding economic areas, including Vietnam, Malaysia, and Myanmar, thus ensuring further market potential for the steel industry in Indonesia. By commencing operations of the Indonesia integrated steelworks POSCO plans to complete a steel belt spanning China-Vietnam-Indonesia-India to target the Southeast Asian market, and continue to grow as a global steel company offering the world’s best competitiveness.

Krakatau POSCO is a joint project between POSCO and Indonesia’s state-run steel manufacturer PT Krakatau Steel. The construction of Krakatau POSCO, with an annual production capacity of 3 million tons, will be completed by the end of this year.

The board members shared their gratitude and encouraging words with those who have been working diligently in Indonesia’s hot weather. In a following luncheon with the employees, Chairman Chung said, “Let us develop our strong will to succeed in Indonesia by bearing in mind that the founding spirit of POSCO was to ‘create greatness out of nothing’.” The Chairman also requested the employees at the construction site to do their utmost to overcome sluggish global market condition.

Director Lee Young-sun emphasized that the facility would be the first integrated steel mill constructed outside of Korea by POSCO and the employees may feel proud of themselves. He asked the POSCO staff to pay full attention to prevent safety accidents and encouraged them to embrace cultural differences amongst the on-site workers.

Based upon the construction of Krakatau POSCO, POSCO will concrete its role as a leading global steel manufacturer and accelerate the entrance into Southeast Asian markets.

This is my first commitment for the Global Storyteller project. I present to you, POSCO South Asia’s very own “Songkran” festival in Thailand!

For those who don’t know much about Thailand, we celebrate Thai New Year called Songkran on April 13th. The festival is widely celebrated not only in Thailand but also in several Southeast Asian countries like Laos, Cambodia, Myanmar, and Sri Lanka. Songkran is a national holiday in Thailand, and it’s also an occasion for family re-unions. Traditionally, Thai people perform “Rod Nam Dum Hua” ritual on Songkran day. During the ritual, the young pour fragrant water into their elders’ palms as a gesture of humility and respect, and also to ask for their blessings.

On April 12th, all Korean directors and Thai staff in Bangkok office gathered around President Kim Sun Won’s office, wearing Songkran festival shirts. Traditionally, flamboyant outfit is worn for the festival to add extra excitement for the traditional “Rod Nam Dun Hua” ritual.

President Kim was the eldest member in the office and we poured fragrant water into his palms with our warmest blessings. In return, Mr. Kim gave well-wishing remarks and appreciations back to the staff. It was a charming moment as everyone in the room was smiling at each other with joy.

It was a truly good opportunity for POSCO South Asia’s local and Korean staff to exchange our thoughts and cultures through this pleasant event, hosted with the courtesy of POSCO’s global mindset. Most importantly, we have developed a firmer relationship among the members of POSCO South Asia.

All of POSCO South Asia members would like to extend our warm wishing to all POSCO members around the world. Happy Songkran

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About “Songkran” and “Rot Nam Dam Hua”

“The Songkran” festival is celebrated from April 13th to 15th in Thailand and in many other countries in South and Southeast Asia as a traditional New Year’s Day.

“Rot Nam Dam Hua” is a traditional way to celebrate the New Year with the elder by pouring fragrant water into their hands. Most Thai people go back to their hometowns to meet their elders during the festival.

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