On October 2, POSCO held a ceremony at the headquarters of EEW Group in Germany to celebrate the sales of one million tons of thick plates to EEW Group and delivered an appreciation plaque to commemorate the occasion. The ceremony was attended by executives of both parties, including Young-Ki Seo, head of POSCO Energy Shipbuilding Materials Marketing Office, Jorg Schorge and Christoph Schorge, Chairman of EEW Group, and Bong-Nam Kim, head of POSCO Daewoo Energy and Shipbuilding Steel Division.

“We have maintained a longstanding partnership for 18 years. We highly appreciate EEW’s confidence in POSCO’s products, which made possible the achievement of sales of more than 1 million tons of thick plates. We look forward to our continuing this strong partnership into the future,” said Young-Ki Seo, head of POSCO Energy Shipbuilding Materials Marketing Office.

Christoph Schorge responded, “We thank POSCO for visiting us all the way from Korea and hope this will be an opportunity for both companies to grow even further.”

EEW Group is a leading Submerged Arc Welded (SAW) steel pipe business corporation with over 80-years of experience supplying high quality SAW steel pipes to the energy industry. In 2000, EEW Group established a production base in Korea and initiated a business partnership with POSCO, strengthening its global competitiveness by incorporating POSCO’s high-quality steel plate technology into EEW Group’s large-scale steel pipe manufacturing technology. In 2015, EEW established a second plant manufacturing facility in Korea to better address the needs of the Asian market while strengthening partnership with POSCO.

POSCO has been increasing sales of thick plates in the global market by partnering with leading overseas clients including EEW group. Going forward, POSCO plans to increase supply to major oil and gas companies such as Exxon Mobil and Saudi Aramco, while actively creating new business opportunities in the wind power industry, which is growing as the next-generation energy source.

POSCO GIGA STEEL –  For Automakers

POSCO GIGA STEEL is like the iPhone X or the latest Xbox or PlayStation for automakers. It’s the newest, hottest must-have item for any type of car. Automakers are constantly working to lightweight their vehicles without compromising strength to meet increasingly stringent safety and environmental regulations. In order to offer its auto partners the ultimate solution, POSCO developed POSCO GIGA STEEL, an advanced high-strength steel (AHSS) that comes in 6 different types for a variety of applications in vehicles.

POSCO GIGA STEEL can be applied to different parts of a vehicle chassis. (Source: Renault Samsung)

Applying AHSS, including POSCO GIGA STEEL, resulted in a 26 percent reduction in the total weight of a vehicle. Not only that, POSCO GIGA STEEL emits about 10 kg less carbon emissions than aluminum from a life cycle analysis (LCA) viewpoint. Plus, POSCO GIGA STEEL is about 2.1 to 3.5 times less expensive than alternative options like aluminum. It’s no surprise that leading automakers like Renault Samsung, Ssangyong Motors and GM Korea use POSCO GIGA STEEL, proving it to be the all-time favorite gift for automakers.

PosMAC- For Photovoltaic Structure Manufacturers

Solar energy is the fastest growing source of renewable energy in the world, according to the International Energy Agency (IEA). In India, solar electricity generation capacity quadrupled from 2014 to 2017 as it is the cheapest form of alternative fuel in the country. The government also plans to back the industry with USD 100 billion in investments. India is one of many countries looking to solar energy to meet their country’s environmental goals and stimulate the economy.

As a result, photovoltaic (PV) structure manufacturers around the world are working to keep up with the growing demand and gain a competitive edge with high-quality products. PosMAC is ideal for PV structures because it is highly corrosion resistant and cost-effective. Not only is the material itself lower in costs compared to other materials, PosMAC ensures a long lifecycle, decreasing maintenance costs to give manufacturers an added competitive edge. For such manufacturers, POSCO PosMAC steel is the perfect gift.

Magnesium- For Electronics Manufacturers

Magnesium is a common material in electronic devices such as laptops and smartphones. Magnesium is the perfect gift for electronics manufacturers such as LG and Samsung, as their competitiveness lies in delivering the most versatile, lightweight and convenient devices to their customers.

The Samsung Notebook 9 is one of the lightest laptops available. (Source: CNET)

Magnesium is also increasingly finding its way into the automotive industry, especially for electric vehicles (EVs), as magnesium plates and other parts allow automakers to further reduce the weight of the car. Magnesium will likely be the perfect gift for that manufacturer who is thinking ahead and always experimenting new ways to improve future models of their cars.

Hyper NO- EV Manufacturers

The market for EVs is one of the fastest growing, expected to expand from USD 27.84 billion in 2016 to USD 38.98 billion by 2021, at a compound annual growth rate (CAGR) of 7 percent. Much of the success of EVs lies in its motors that will determine the EV’s efficiency, performance and feasibility for wide-spread use. As such, POSCO came up with the perfect gift for EV manufacturers – the Hyper NO.

Hyper NO is a type of electrical steel used to make electric motors. POSCO’s new technology increases the magnetic flux density and reduces core loss of electric motors, making it the perfect gift for electric motor manufacturers looking for ultimate efficiency.

Stainless Steel Products- For Everyone

There are some gifts that satisfy just about everyone, like a gift card for the movies or the nearest cafe. It’s not super special, but it’s a safe and sure choice for anyone as it is practical and functional.

Stainless steel is the ultimate gift for manufacturers as it’s one of the most widely-used materials in the world for a variety of products including surgical tools, watches, kitchenware, buildings, pipes, artistic sculptures and plenty more. It’s literally the foundation of cities and communities all over the world, and without it, the world would not have the most basic systems in place today. Moreover, stainless steel’s non-corrosive and 100 percent recyclable characteristics make it one of the best gifts for every kind of manufacturer.

No matter the type, there is a perfect gift for every manufacturer with steel. POSCO will make sure to provide even more customized and innovative solutions for its partners and continue to “keep on giving” in the new year.

Consider some of the bigger shifts in the US energy industry:

The Shale Revolution

The “shale revolution” has impacted the entire energy system in the US and worldwide. Although the elements of horizontal drilling and fracking had been known for decades, it was the entrepreneurial genius of men like George Mitchell of Houston who found the way to link these technologies and apply them commercially. It resulted in the US going from a natural gas importer to an exporter of pipeline gas and LNG, an exporter of oil (but not a net exporter), and the collapse of prices for gas, LNG, oil and oil products. It reverberated throughout OPEC countries and other major producers like Russia, as well as in major importing countries. It also enabled oil and gas producers to reduce their footprint overseas and focus on domestic production opportunities.

The “shale revolution” has impacted the entire energy system in the US and worldwide. (Source: Bloomberg Business)

Coal Industry

Coal, which had been king in the middle of the last century, has been declining rapidly, losing market share to often cheaper natural gas. The improbable opportunity to ship coal to Germany provided some relief. The Trump Administration may have won the election by making promises to US coal-producing states, but having an impact on this declining industry will take more than rhetoric. While much attention has been given to anti-coal regulation it has been market forces that caused electricity producers to shift from coal to natural gas.

Nuclear Energy

Nuclear energy faces the twin threats of obsolescence, as well as competitiveness with natural gas. The regulatory system also contributes to its decline. Many of the roughly 100 nuclear facilities operating in the US were built about 40 years ago, which means that they were due for major upgrades or retirement now. Only a few new plants are under construction, and they are massively over budget and have been built only in states with regulatory systems in which consumers must bear the cost of such overruns. Conventional wisdom had been that these plants would be upgraded and run for decades more. Instead several have announced shutdowns, and more are expected to follow. Nuclear had been considered a low-cost base fuel, but has trouble with competing with natural gas at current prices.

U.S. President Donald Trump and Secretary of Energy Rick Perry (Source: Fortune)

Energy policy in the Trump Administration, led by Secretary of Energy Rick Perry, is trying to protect both coal and nuclear because of their important role as baseload producers, in contrast to wind and solar that cannot provide consistent power to the system. But it seems doubtful that regulatory mechanisms will overcome market forces.

Falling Prices

The collapse of oil and natural gas prices led to the elimination of hundreds of thousands of jobs worldwide and slashing capital budgets, especially for higher-cost production such as deepwater, the Arctic, and other frontier environments. The shale play was led by small independent companies, but many of them took on too much debt, spent too much money to buy leases from mineral-rights owners, and drilled but often didn’t complete wells because of a focus on future growth. A number of them have failed financially or sold off properties. Even giants like BHP Billiton, which entered the US shale market with a USD 20 billion investment, wrote off USD 13 billion within six years. Although there continues to be substantial financing available from Wall Street, the focus has shifted from growth to cash flow. This has important implications.

But cheaper natural gas has had a positive impact in four areas:

Natural Gas and Oil Pipeline Projects

Natural gas and oil pipelines (midstream) have had a resurgence of activity, both proposed and built. To be sure there have been and continue to be strong challenges by environmental organizations. However, many pipelines have gone forward and others have been suspended because of economics rather than protest.

The U.S. went from an importer to an exporter of liquified natural gas. (Source: The Globe and Mail)

New LNG Facilities

LNG exports are a new phenomenon for the US. For years the US faced a deficit in natural gas, leading to proposals for nearly 40 LNG import facilities. Fortunately, most of them were not built, and those that were have largely become LNG export terminals. These required massive capital investment across the value chain. Greenfield facilities are now planned or under construction in multiple locations.

Expansion of Pipelines to Mexico

Pipeline gas to Mexico is little noticed by the public but the expansion has been dramatic. Despite the liberalization of the energy system in Mexico the demand for natural gas for industry and consumers, especially in Northern Mexico, is likely to continue. There is even talk about an LNG export terminal in Mexico’s Baja peninsula, to be supplied from US sources. The shadow over this is anti-immigrant policies of the Trump Administration and uncertainties related to the renegotiation of the NAFTA trade agreement. There is concern that the upcoming Presidential election in Mexico will result in an anti-US tide that might impact progress on the energy value chain.

Resurgence of the Petrochemical Industry

The petrochemical industry in the US has had a resurgence with low-cost natural gas. Approximately USD 100 billion of investment is currently underway or recently completed in the Texas and Louisiana Gulf Coast.

What we see here are currents moving in very different directions in the extended and complex energy supply chain in the US and internationally.

What does this mean for the steel industry?

Pipelines

Steel is literally the backbone of the US oil and gas system. Hundreds of thousands of miles of pipelines form a complex web across the continental US, in Alaska, to Canada and Mexico, and out to the Gulf of Mexico. Though mostly unseen, these pipelines enable the production and consumption of resources reliably and at affordable prices. New activity will be limited in the Gulf of Mexico for some time, with most of it focused on completing projects that were already underway. There may be some new activity in Mexican waters in the Gulf as the political opening there results in development, much of it in proximity to known fields on the US side of the border.

For example the Keystone XL pipeline, planned to bring more heavy oil from Canada, has been contentious for years for a variety of reasons including the higher carbon content of the crude and the route of the pipeline. Opponents have recently adopted a new strategy suggesting that the project is no longer economic – this is a way to undermine political support. TransCanada, the developer, insists that it is viable and on track. However, in Canada itself, plans have been abandoned for a massive oil pipeline to connect the producing area of Alberta in Western Canada to the east coast.

The Keystone XL pipeline was planned to bring heavy oil from Canada to the U.S. (Source: Horizon Supply Company)

Platforms

The offshore industry has been a major user of steel, both for platforms often built in Korea, and also for the related supply chain. Capital investment has been hardest hit in this area, and may not resume for 3-5 years until global demand increases and production growth slows.

LNG Facilities

LNG is a relative bright spot. The value chain includes the production of gas, transportation to newly-built liquefaction facilities, LNG ships, and import/regasification facilities. Lithuania recently built an LNG import facility to promote its independence from Russia. In other cases, majors like Shell, are now discussing building infrastructure in countries as diverse as South Africa and Vietnam so that they can become gas users. Japan shut its nuclear facilities after Fukushima and has been slow to reopen them. It lacks a domestic pipeline system because of the mountainous terrain and has relied on two dozen LNG import terminals. Will that create demand for new facilities?

An interesting twist is that Kinder Morgan, a leading pipeline company, has defined itself more broadly as an energy transfer organization. It had been frustrated in trying to build a natural gas pipeline from the Marcellus field in Pennsylvania to Boston, where natural gas prices are often the highest in the US. So they have decided to build LNG vessels to transport gas from terminals in Louisiana and Texas to Boston, despite restrictions imposed by the protective Jones Act that requires US vessels and crews for transport between US destinations.

LNG vessels transport LNG between terminals. (Source: World Maritime News)

Shale Gas Wells

The US shale play has been compared to a manufacturing process. Traditional development wells were expected to produce gas for years and oil sometimes for decades. But the fracking operations have a rapid decline curve which means that companies are constantly drilling new horizontal wells and are doing so for greater lengths. More than a dozen horizontal wells may stretch from a single pad. Budgets are now focused on cash flow, which means spending less on acquiring leases and more to produce oil – this results in more spending on steel.

Crude Oil Vessels

The US is now exporting about 2 million barrels of oil per day. US producers had been largely banned from exporting oil until two years ago when outdated legislation was changed. Increased domestic production and the ability to export dramatically changed shipping patterns. Nigeria had been a major exporter to the US but has forfeited the market. Saudi Aramco bought out Shell’s interest in the Motiva joint venture and took complete control of the Port Arthur refinery, the largest in the US. Many observers believe this was to assure a market for Saudi crude. Thus increased trade in oil and shifting markets may create demand for new vessels.

Petrochemical Facilities

Finally, low-cost natural gas has been a constant in the US. In addition to the new construction of petrochemical facilities along the US Gulf Coast mentioned previously, it adds the potential for a reindustrialization of the US economy that was unimaginable just a few years ago. This can cut across many industries for which power costs are a major factor. This may seem inconsistent with e-commerce, but the two may go together as mega distribution centers are built so that a growing fleet of trucks can provide same-day delivery to consumers.

There are many paradoxes in the American energy system and supply chain. For the steel industry, the key is to determine where those opportunities are located.

Bill Arnold is a professor in the practice of energy management at Rice University’s Jones Graduate School of Business. Previously, Arnold was Royal Dutch Shell’s Washington director of international government relations and senior counsel for the Middle East, Latin America and North Africa for 16 years.

Cover photo courtesy of Petroleum Economist.

POSCO CEO Ohjoon Kwon (left) shakes hands with Tom Schuessler, president of ExxonMobil Upstream Research Company, at the signing ceremony between ExxonMobil and POSCO.

ExxonMobil, the world’s largest oil company, upholds strict standards when choosing materials, and for the last five years has been working with POSCO to manufacture and test slurry pipes at worksites. Last year, a 1.2 m long slurry pipe – made with POSCO’s high manganese steel – was installed at ExxonMobil’s Kearl Oil Sands Project in Canada. It demonstrated a resistance to wear five times higher than conventional materials.

With its abrasion-resistant properties, POSCO’s high manganese steel can greatly reduce overall operating costs and increase oil production. “Seamless collaboration has led to the quick commercialization of this new high manganese steel technology, which will set a new standard for oil sands mining operations,” said Tom Schuessler, president of the ExxonMobil Upstream Research Company, who attended the ceremony.

POSCO and ExxonMobil employees pose for a commemorative photo shoot after inking a high manganese steel supply contract at the POSCO Center.

In response to president Schuessler, CEO Kwon suggested furthering their partnership by utilizing high manganese steel in various other businesses within the oil sands industry.

POSCO also plans to use its high manganese steel in the making of heavy construction and bulletproof military equipment as well as steel pipes and facilities to move various minerals including oil sand slurry.

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Apart from music’s biggest night, the Staples Center hosts more than 250 events throughout the year including the games of the NBA’s Lakers & Clippers, the NHL’s Kings, the WNBA’s Sparks, and countless other events. It can host an LA Lakers game one night and in less than 24 hours, it will have transformed into an ice skating rink for the LA Kings (watch the video below to see how it is done). Rolling Stone magazine named it among the top 8 arenas in the US, and it remains one of the top grossing venues as well.

Watch the Staples Center transform itself through 6 events in 4 days.

Obviously a building of this magnitude requires steel in its construction. But a closer look at the Staples Center reveals some unique characteristics that make it stand out among some of the best venues in America.

The Supertruss Supporting the Roof

Most circular arenas and stadiums are built using a ring beam design; however, the Staples Center engineers decided to go with an exposed supertruss in which the structure’s framework is supported by one central truss that supports the building like a spine. At the time of its construction, no other circular sports facility in the nation had used such a design due to the high cost of the steel that had be used for the supertruss.

This supertruss, measuring 64m wide and almost 14m deep and spans the 132m roof with secondary trusses reaching out to connect to the walls. It was assembled in 5 separate sections more than 30 meters in the air, and after each section was complete, the mechanical and roofing systems were installed.

In this short timelapse video, the supertruss can be seen as its spans the diameter of the Staples Center

The Staples Center has hosted the awards show for 17 out of the last 18 years in part due to this roof and its ability to withstand excessive weight demands of up to 175 tons. Staples Center GM Lee Zeidman told Billboard.com that for the first show, he  hired a surveying company to make sure the roof didn’t warp and that the steel didn’t drop. He said, “Nobody had ever done that big of a Grammy show in a building before.”

Strengthening with Shear Walls

To support the Staples Center against the earthquakes that regularly hit the Los Angeles area, contractors needed to increase the structural integrity of the building. PCA, the contractor that made much of the cement foundation, explained that in order to strengthen the perimeter of the main bowl area, they included 4 curved shear walls up to 53m long and almost 49m tall that were used to counter the effects of the lateral load. Also, along the radial lines are 10 more cast-in-place shear walls up to 15m long and 76cm thick. The walls are all supported by large mat style grade beams with cast-in-place ring beams tying the walls together with the precast columns between them. The shear walls and structural reinforcements provide support to the Staples Center and the visitors in the building.

Connecting everything together with steel

In addition to supporting the roof and walls, steel runs throughout the rest of the Staples Center as well.  The concession stands and restaurants are all connected by seemingly endless steel pipes that deliver the beverage of choice to millions of fans, and the ice hockey rink could never be made without the help of pumps and stainless steel piping. Murray Company was contracted for the installation of the sump pump system (for the ice floor), water systems, fuel oil systems, and concession stand piping. They reported using “in excess of 68,000 man hours with a peak crew size of 40 tradesmen” to install the maze of pipes for the Staples Center.

Steel piping runs throughout the Staples Center helping to make sure everything gets where it needs to be. (Photo courtesy of Murray Company)

*Cover photo courtesy of mark6mauno

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POSCO Holds an IR Conference Call To Announce The First Quarter Earnings, Reports 15,440 Billion In Sales Revenue On A Consolidated Basis

POSCO (NYSE:PKX) held a conference call on 24 April to announce the results of their first quarter for fiscal year 2014. On a consolidated basis, the company recorded KRW 15,440 billion in sales revenue and KRW 731.3 billion in operating profit.

The company saw a drop in sales and operating profits due to global economic recession. However, its operating profit margin grew by 4.7 percent, as a result of improved profitability in non-steel businesses. Net profits decreased to KWR 55.6 billion, due to the weakened won and tax audit expenditure.

On a Non-consolidated Basis, POSCO Records KRW 7,363.8 Billion in Sales Revenue and KRW 517.7 Billion in Operating Profit

On a non-consolidated basis, the company recorded a sales revenue of KRW 7,363.8 billion and operating profit of KRW 517.7 billion.

The volume of crude steel production and sales for Q1 dropped to 9.3 million tons and 8.4 million tons respectively, effected by shorter calendar days, as well as the maintenance of main facilities.

The seasonality also had an impact to POSCO’s quarter-to-quarter sales in the major steel-consuming industries such as automobile, and shipbuilding & ocean plant, which decreased to 2.0 million tons and 0.7 million tons respectively.

Despite the drop in Chinese steel prices, POSCO was able to record an operating profit margin of 7.0 percent, reporting a quarter-to-quarter increase of KRW 30 billion on a non-consolidated basis, by maintaining its price while cutting down on raw material costs.

POSCO further improved its profitability by converging marketing and technology to reinforce customer-oriented sales activities. The company increased the sales portion of its seven ‘high value-added’ and ‘strategic’ core product areas including automobile, shipbuilding, and energy steel pipes from 48 percent in 2013 to 51 percent. The company also strengthened its solutions for the demand industry by building high manganese steel LNG storage tanks, expanding automobile steel plate supplies for super high strength complicated structures on the 1Gpa grade, and developing 16 new steel grades that respond to customer needs.

Continued Efforts to Improve Financial Soundness

Efforts to improve its financial soundness were also continued.

In March, POSCO reimbursed high-yield bonds valued at USD 700 million to cut down the debt, reducing the cost of interest by using its own funds and low-yield Japanese Yen bonds issued in December 2013. Furthermore, the company made various efforts to improve financial conditions, such as reducing turnover period of the assets. As a result, its cash and cashable assets increased by 46 percent compared to the end of 2013, reaching up to KRW 2,033 billion.

POSCO is expected to further improve its cash flow as it cuts down on investment this year. The company is readjusting its investment shares in project-financing for POSCO E&C, and the funds implementation plan for its joint venture with Dongkuk Steel and Vale, Brazil CSP Steel Plant Complex, was also delayed.

Improved Performances of Key Affiliates In Trade and Construction Businesses

Performance from its major affiliate companies including trades and constructions also improved this quarter. POSCO E&C reported 6.6 percent in operating profit margin, recording a 2.2 percentage point  growth quarter-to-quarter, and Daewoo International also reported 1.3 percent in operating profit margin, recording an increase of 0.4 percentage point.

POSCO anticipates that the global demand for steel in second quarter to recover slightly, as steel prices rebound after the Chinese New Year due to inventory adjustment and restored demand. The global demand will turn to a stable 3 percent growth level in 2014 ~ 2015, as the demand from the U.S. and Europe recovers to 3 ~ 4 percent range.

POSCO plans to go all out in improving management performance, by reinforcing sales activities that incorporates technology into marketing. The company will also continue its efforts to increase the sales portion of ‘high value’ products by providing customized solutions that touches all aspects of the business, from product planning to sales, and services, while at the same time maximizing its financial soundness.

2014 Q1 Business Results