Since 2014, sales of products combined with Solution Marketing have tripled, and sales of POSCO’s World Premium Products (WPP) have increased by 56 percent.

It Wasn’t Always Smooth Sailing

When the 2008 global financial crisis hit, the global economy as a whole suffered. The steel industry experienced stagnant growth, even in its subsequent recovery. From 2012 to 2016, annual steel sales remained fixed at 35 million tons.

The 2008 Financial Crisis was felt in markets all over the world. (Source: South China Morning Post)

The main culprit for the slow recovery was overproduction, mostly from the heavily-subsidized Chinese steel industry. Between 2000 and 2014, steel production doubled from 800 million to 1.6 billion tons, exceeding the global demand for steel by 100 million tons.

As a result, steel markets around the world saw prices falling, layoffs and steel mill closures.

SEE ALSO: Asian Steel Watch: Megatrends Shaping the Future of the Steel Industry

A Strategy for Success

In order to stay competitive in a stagnant market, POSCO made the decision to focus on Solution Marketing and the sales of its World Premium Products (WPP) such as POSCO GIGA STEEL for cars and PosMAC for solar panels.

Solution Marketing involves hyper-customization for POSCO’s partners to deliver optimal material solutions for their products. Some notable projects this year have been with automakers GM Korea and Ssangyong Motors for the launch of their new models made of POSCO GIGA STEEL. POSCO gave them full support from development and R&D to testing and post-production evaluations, redefining the role of a steel supplier.

GM Korea and POSCO worked together to incorporate POSCO GIGA STEEL into the 2017 All New Chevy Cruze. (Source: GM Korea)

As a result, POSCO’s operating profit margin (individual basis) was 10.8 percent in 2016, making it one of the highest performing steel companies in the world. Its recovery and growth continued into 2017.

SEE ALSO: 6 Reasons Why POSCO GIGA STEEL is Ideal for Automakers

Cultivating the Industry

Following its continued success with Solution Marketing, POSCO is now determined to share its insights and technology with up and coming small and medium-sized enterprises (SMEs). POSCO has completed 32 shared-growth projects through which they work with SMEs to develop ways to cut costs, improve the quality of their work, provide financial assistance and education and training.

One of the most recent projects for shared growth is a collaborative business model called “System Construction” that provides a framework for effective technical cooperation among POSCO’s partners in the construction industry. The model was developed jointly with NI Steel and entails systemizing composite materials such as beams, floor decks, exterior panels and roofing materials, all based on joint R&D from both parties.

Under System Construction, workers from various sectors come together for joint development.

POSCO is continuing its efforts to advance its competitiveness by providing material and technical solutions to its partners, and along the way, fostering the growth of SMEs in various industries to ensure a more stable and robust economy.

It all started 49 years ago in a small fishing village on the East coast of Korea and has grown to be the fourth-largest steel producer in the world.

A Small Fishing Village with 39 Employees

To help rebuild the country after the end of the Korean War, President Park Chung-hee made steel production and heavy industry the centerpiece of his Second Five Year Plan (1967-1971). Despite there being no steel industry in Korea, President Park wanted to be able to manufacture steel domestically without relying on imports and foreign technology.

Opening of POSCO in April 1968

In 1965, President Park visited Pittsburgh, PA, where he gained insight into the steel industry and what would be required if Korea were to develop its own independent production facilities. One year later, Korea International Steel Associates (KISA) was formed. KISA included a consortium of eight companies from five different countries whose goal was to help Korea start its own integrated steelmaking facility. By 1967, the government approved a plan from KISA that included a basic agreement on technology & funding.

Pohang, a small fishing village on Korea’s eastern coast, was chosen as the official site of the steel mill. POSCO was officially incorporated on April 1, 1968, as a joint public-private venture with just 39 employees. Park Tae-joon came on board to serve as CEO and by May 1968, construction of POSCO’s headquarters had begun.

In May 1968 the POSCO headquarters construction had begun

Setbacks to Success  

Despite the steps taken to move Korea’s steel industry forward, there were many setbacks along the way. First, overshadowing each step of its development was the skepticism coming from both foreign and domestic fronts. Foreign investors could not understand why Korea would expand into industries it had no history with. And local leaders doubted their ability to overcome all of the technological, economic, and infrastructural hurdles facing them. To make matters worse, KISA was disbanded in September 1969 – leaving plans for POSCO up in the air.

Korean President Park Chung-hee was instrumental in getting POSCO off of the ground. Here he is at one of the blast furnaces at Pohang Works. (1976)

Determined to complete the project, President Park began negotiations with Japan who later provided the grants, loans, and technology for the construction of the initial plant. Construction of the steel mill started in 1970 and on June 9, 1973, at 7:30 am, the first steel came off of the line. By April 1974, they had decided to expand the capacity of the third furnace at Pohang Words to 5.5 million tons and the fourth furnace capacity was increased to 8.5 million tons.

Expansion

Because of POSCO’s early successes, the Korean government decided to build a second facility on the peninsula’s southern coast in Gwangyang. After the completion of the fourth phase of construction at Gwangyang, POSCO had a total of 20.8 million tons of crude steel production capacity. Of that total, Pohang was producing 9.4 million tons with Gwangyang producing 11.4 million tons. It earned the distinction of being the world’s largest steel mill and POSCO become one of the main driving forces behind the industrialization of Korea’s economy.

After its completion, Gwangyang Works was the largest integrated steel mill in the world. (1992)

In 1986, POSCO entered into a 50/50 joint venture with US Steel (UPI). Their partnership was set to develop a comprehensive modernization program that would upgrade the processes and equipment of the facility. Since the establishment of USS-POSCO Industries (UPI), POSCO has continued to branch out all over the globe. It has set up STS production plants at Zhangjiagang Pohang Stainless Steel (China) and POSCO Tai Knox (Thailand), and automotive steel plate production lines (CGL) in Mexico, India, and China. PT Krakatau POSCO was built in 2013 and was the first integrated steel mill in Southeast Asia.

POSCO Becomes the Most Competitive Steelmaker in the World

By 2014, production capacity had increased to 37.7 million tons. Pohang now has three heavy plate mills, four cold rolling mills, five blast furnaces, heavy plate mills, and four hot rolling mills. Beyond its scope and production capacities, POSCO is committed to developing advanced, high-quality World Premium Products. In addition, POSCO’s innovations in other industries, integration of smart factory technologies into the production process, and its commitment to local communities continue to push POSCO forward.

Advanced World Premium Products

With a focus on advanced steel solutions, POSCO has developed a wide range of products that can be customized to fit a customer’s unique needs. These World Premium Products are the reason POSCO has been listed as the most competitive steelmaker for seven years in a row. For example, PosMAC has been utilized in many different ways from floating solar cells to durable public art pieces. Also, POSCO’s award winning PosCozy floor plates provide soundproofing and heat insulation.

The hot rolling process at Gwangyang produces 3,400,000 tons per year

Lithium Extraction & Other Ventures

POSCO has also strengthened its global competitiveness by accelerating new businesses in the materials and energy industries. POSCO has developed a fuel cell plant that was completed in 2008, a Myanmar gas field that produces 500 million cubic feet of gas each day, and lithium extraction technology that is 10 times faster than previous methods.

Solution Marketing

In addition to manufacturing advanced, high-quality steel, POSCO’s Solution Marketing provides customers with added technology solutions and commercial support. Instead of just supplying products and stepping away from the customer, POSCO works with its customers to create customized solutions that ensure successful implementation. Partnering with manufacturers early on in the production process, POSCO has stepped beyond its role as a steel supplier and now serves as a solutions provider.

Smart Factory Technology

POSCO also incorporates cutting edge technology and innovations into its production processes. At its automotive steel plate factory in Gwangyang, POSCO introduced AI technology into its coating weight control system, improving quality and reducing waste. Also, POSCO CEO Ohjoon Kwon remains committed to developing more smart factory solutions and has been meeting with executives of other companies, such as GE and Siemens, to explore partnerships and best practices.

President Park Chung-hee comes to POSCO to celebrate the opening of Pohang Works

Someone seeing the successes of POSCO today might have a hard time understanding how it even started, much less how it was able to overcome the immense barriers it faced. POSCO continues to be a leader in the steel industry with its advanced, high-quality World Premium Products. Also, POSCO’s successes in its non-steel ventures show its commitment to remaining on the cutting edge of technological trends and industrial innovation. Watch the video below to see for yourself.

https://www.youtube.com/watch?v=nq574Ivp7c0

High-Quality Steel Products Keep POSCO Competitive in China

In China, several factors have led to more difficult market conditions. Can you tell us about what it is that POSCO is doing to stay competitive in China? How do POSCO’s steel products compare to those from other companies?

Kim Huyn Ah: POSCO has done several things to remain competitive. First, we have focused our attention on creating high-quality World Premium Products. As you know, there is a lot of low-priced, low-quality steel, but our World Premium Products stand out because we are able to make them consistently and without defects. Secondly, POSCO has positioned itself near other key industries. For example, our machining centers in China are located near other large international car manufacturers like GM and Volkswagen. So, even when market conditions go south, there is always stable demand simply due to the geographic proximity.

Yuan Feng: In mid-2015, our production output of World Premium Products was around 30%. By 2016 that had increased to 49%, and as of January 2017, our total output consists of 55% World Premium Products. As Huyn Ah said, other companies can make similar products, but no one can do it at our speed and consistency. Our customers rely on that.

Wang De Hui: Because of the overcapacity of steel, things were difficult for a while, but they are getting better. We get our raw materials from HQ, and because our raw materials are better we can provide better products. And actually, the abundance of low price, low quality steel ended up creating more demand for our advanced, high-quality steel products.

We are committed to maintaining higher quality products. Each year we analyze the steel to make sure the raw materials and production processes are better, more advanced, and with fewer impurities. I know the difference between our materials and our competitors. What we get from Korea is just better.

Better Customer Service with Solution Marketing 2.0

In addition to producing high-quality steel, how does POSCO stand compared to other steel companies? What is it doing to keep customers satisfied?

Kim Huyn Ah explains the importance of POSCO’s high-quality products in China’s market

Kim Huyn Ah: At POSCO, when questions come up, or if a problem occurs, we do our best to find a solution as soon as possible. Through POSCO’s Solution Marketing 2.0, we provide our customers the tools they need to maximize convenience and efficiency in utilizing high-quality steel.  Solution Marketing 2.0 is practiced under three strategies: digital solution marketing based on advanced IT technology; innovative solution marketing that focuses on speed, value and quality; and tailored solutions that provide comprehensive support for each customer. This process helps our customers understand the balance between a product’s features, price, and long-term benefits.

Also, we work hard to provide products to clients on time and on schedule. It is one of the most basic parts of our job, but oftentimes one of the most difficult to control due to floods, typhoons, or other things that are out of our control. Customers demand more, so at POSCO CSPC we have made production systems management a priority so that we can deliver our steel products on time. Because of these improvements, we have been able to meet delivery times more effectively than other steel companies in the area.

Yuan Feng: Huyn Ah really touched on a lot of the important points for us, but I would like to add that POSCO now has an entire department dedicated to service. Now we are able to listen to customers more effectively and respond to their questions and feedback more quickly. We do our best to solve problems as quickly as possible.

Wang De Hui: The Chinese steel market has grown very quickly. Because POSCO is almost 50 years old, we have a better understanding of service and quality. That being said, our competitors in China are learning fast. We must continue to adapt and be competitive. Last year, POSCO set up a Solutions Marketing program to promote high-quality products and customized solutions. Our customers really appreciated that we had higher quality products and were willing to work with them for individualized solutions.

POSCO Fosters Employee Development

All of you are in Korea participating in POSCO’s Global Mobility Program (GMP) where you are able to collaborate with other POSCO employees from around the world while developing new skills at HQ. As part of the management team in China, how has POSCO helped you grow in your career?

Kim Huyn Ah: It is helpful for me to take part in the Global Mobility Program. Seeing HQ and how they work helps us understand the full system process better. Also, as a Korean, I am often in the middle between HQ and our local Chinese office. It can be difficult to understand communicate to both sides effectively. But POSCO has supported me in my career and this experience will help me have a better understanding of the work process in Korea.

Yuan Feng explains the significance of being able to get training at POSCO HQ. His work in maintenance is critical to maintaining smoothly running factories that deliver POSCO’s steel products on time and without defect.

Yuan Feng: I joined the Global Mobility Program because I wanted to learn more. My department is new; it was just formed last year so I want to see more about POSCO and how it works. I think the GMP gives me the opportunity to develop more as an employee, but also in other ways as well. For example, I can have the chance to work with people from other countries and learn about their cultures as well. When I first started, I had to work with some people from Indonesia. We both had a bit of trouble understanding each other, which is natural. However, after we learned about each other’s cultural backgrounds we could understand each other much better.

I will be in Korea for 6 months. During that time I want to create a new system for our Maintenance Department so that it can be more stable and strong. In addition, because it is a new department there needs to be a systematized program for development. We have done well since last year, but we have bigger goals and we want to do more.

Wang De Hui: This is an exciting opportunity for me. I want to improve my skills and do more with POSCO. Being a quality control specialist, I’m responsible for collecting data and measuring performance and customer choice. It is important for me to know how these things are done at HQ so we can improve our efforts in China.

POSCO is Tops in CSR in China

POSCO has won many awards around the world for its CSR work. In particular, it recently won one of the top awards for Corporate CSR work in China. Have you participated in any of POSCO’s CSR events? What effect do those activities have on the community?

Kim Huyn Ah: At POSCO CSPC we have a CSR department that organizes several activities. We have events to plant trees, visit nursing homes, and help out at homes for disabled children. My most memorable experience was when I visited a home for disabled children. When we visit, they greet us so warmly and show so much gratitude.

Wang De Hui has seen the impact of POSCO China’s CSR work

Yuan Feng: At our office, we participate in several CSR activities. We help out with environmental initiatives and with the local communities around the factory as well. We support 3-4 families regularly with supplies and help them with simple things like painting their houses. We sometimes go on trips with them. In the beginning, we would simply donate money, but after seeing the benefit to the communities, and for the staff as well, we are becoming more and more active with CSR activities.

Wang De Hui: At POSCO Qingdao, we organize an event every month. It is well attended by our staff as even our general manager and department managers go. I’m glad we do things like this and I enjoy participating. We mainly go to help out at public nursing homes and schools for the deaf. We also raise money to buy basic needs, such as food, clothes and home appliances. Activities like this have given POSCO a good reputation in the local communities, which is important.

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For some artists, steel can be heavy and difficult to work with. In addition, considerations for ductility, corrosion resistance, and price must also be taken into account. Working to address these issues, POSCO has partnered with many artists, architects, and designers to provide the right steel to match their artistic vision.

In the three pieces below, POSCO’s World Premium Products were used to offer unique solutions for each design concept. See how these three pieces of art utilized steel to not only make them stronger and longer-lasting, but also to make them more beautiful.

POSCO’s Solar Pine – Art that Generates Energy

The Solar Pine sculpture is located at POSCO Energy’s headquarters in Incheon, South Korea. POSCO Energy wanted to install a structure in its Green Park that utilized solar power, could be mass-produced, and displayed an aesthetic beauty that could be used in parks and green spaces around the globe. Its pattern resembles the geometric shape of a pine cone with an angled roof with solar panels. During the day, its unique pattern casts a beautiful shadow on the ground below, and at night the energy absorbed by the solar panels is used to power lighting on the Solar Pine and also within the park.

At night the Solar Pine lights up using the energy absorbed through its solar panels. (Photo courtesy of Kyungsub Shin)

The upper structure is 7.2m in diameter and contains nine separate modules with 54 solar panels that can generate 1200W per hour. Also, because it is made for mass production, each piece is made in the factory and bolt-assembled on location – making construction simpler while also lowering costs.

The Solar Pine roof is tilted to provide maximum energy absorption for the 54 solar panels. (Photo courtesy of Kyungsub Shin)

POSCO’s Solar Pine is built with PosMAC steel, an advanced, high-strength steel that is lighter and thinner than galvanized steel and more resistant to corrosion. PosMAC is ideal for structures like the Solar Pine, which require strong, lightweight steel that can withstand the elements. PosMAC has also been used in other designs requiring this combination including POSCO Humans’ floating solar power system, high-durability homes, auto parts, and several new green energy projects in India.

During the day, the light shines through the roof of the Solar Pine, replicating its geometric design in shadows on the ground. (Photo courtesy of Kyungsub Shin)

POSCO’s Steel Igloo

Steel is typically used as structural support; however, when designing the Steel Igloo, architect Kim Chan-joong decided to use POSCO’s World Premium Product PossSD, an advanced steel that offers superior strength and ductility.

The reflective surface of the Steel Igloo combined with the punctured surface creates a unique viewing experience. First constructed for an exhibition at Kumho Art Museum, it was later moved to a forest near Suwon, Korea.

The Steel Igloo is made from 177 steel sheets, each punctured with holes allowing light to break through. The combination of the holes and the reflective surface of the steel create a very unique experience for those lucky enough to see it in person.

POSCO worked with Kim during the manufacturing process, helping with the polishing, bending and reflective effect that was requested in the original blueprint.

PossSD, which stands for Super Ductile Duplex, was used because of its notable characteristics that make it suitable for an outdoor art display like the Steel Igloo.

The punctured holes of the Steel Igloo allow light to come through and create shadows on the surrounding walls.

PossSD combines austenitic and ferritic steels to maximize the strength of each while minimizing the weaknesses. Austenitic and ferritic steels are both considered fairly easy to produce, but both have certain drawbacks. Austenitic steels are low-strength and but also offer high resistance to corrosion. Ferritic steel, on the other hand, is stronger but less resistance to corrosion. They also use less nickel than austenitic steel, making it slightly more economical.

By combining those two types of steel in PossSD, POSCO was able to create a unique product that is stronger and more ductile than most ferritic grades, while also being twice as strong as both types of steel by themselves. It also offers stronger corrosion resistance while also being more cost effective.

Stepping inside the Steel Igloo allows viewers a completely different experience with light shining inward.

Pangdolane – Resting in a Rock Made of Steel

Pangdolane is a wordplay on the Korean words pang-dol, a type of volcanic rock found on Jeju Island and an-ae, meaning inside. POSCO worked with multiple artists, scientists, and architects to create this public art piece that also provides a small shelter for those visiting Jeju Island.

Pangdolane sits near a beach on Jeju Island. (Photo courtesy of Scale.kr)

With its gray color and holes of varying sizes, the exterior of Pangdolane resembles the basaltic rock for which it is named. Inside Pangdolane, visitors can rest while enjoying the shadows created by the design of the structure.

Sitting inside Pangdolane lets visitors see a completely different view. (Photo courtesy of Scale.kr)

Located on a beach on Jeju Island, designers were faced with issues of corrosion. The air in coastal regions typically has a higher saline density, which causes metals, including steel, to corrode much more quickly. Therefore, POSCO’s World Premium Product PosMAC was used to construct Pangdolane. PosMAC is specifically designed to be both more resistant to corrosion and self-healing. When designing Pangdolane, PosMAC was the obvious choice as its special properties ensure that it will stand the test of time – even on the beach.

Steel is often used in buildings to make them stronger and long-lasting. But steel does not have to be behind walls and floors; it can also be used on the exterior. In each of the art pieces above, POSCO’s World Premium Products were used in order to provide specific benefits that fit each situation’s needs. Whether it is having a higher resistance to corrosion or providing a lighter solution that can be mass-produced and bolted on site – POSCO’s World Premium Products have been able to overcome many of the problems that come with working in steel to make sure that these pieces of art can be enjoyed for decades to come.

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However, due to the successful management of POSCO’s overseas subsidiaries, the combined performance of the group improved significantly. By focusing on sales of high value-added products based on solution marketing, engaging in extensive cost-saving efforts, and generating revenues via the “Innovation POSCO Project”, POSCO was able to deliver a two-digit profit margin and a more than 50-percent jump in stock value.

By continuing this work in 2017, POSCO is determined to maintain its position as a leader in the global steel industry.

POSCO’s Vision for 2017

In 2017, further improvements in the global steel market are likely as the global economy continues its recovery. Also, improvements are expected in the supply-demand imbalance as China is expected to slightly reduce steel production.

In 2017, POSCO plans to further the success seen in 2016 and continue to lead the steel industry through innovation and continuous improvements of its World Premium Products.

However, the spread of trade protectionism across developed and developing countries alike, is expected to create potential barriers for POSCO’s export environment. Moreover, competing mills have been accelerating consolidation and expansion to maintain their dominance in their respective local markets while also focusing on the development of high-end products. All of these factors point to ever intensifying competition both in terms of quantity and quality.

To remain competitive with other leading global players in 2017, POSCO plans to solidify its profitability by completing its restructuring process as part of Innovation POSCO 2.0 and strengthening its foundation for future growth.

In CEO Ohjoon Kwon’s 2017 New Year’s message, he marked the steps that must be taken in 2017 to accomplish these goals. First, POSCO must continue upgrading its steel business with proprietary technologies. Second, the business structure of POSCO Group should be continuously restructured to improve efficiencies in low-profit businesses. Third, future growth must be ensured by strengthening competencies based on “Smart Solutions.” And lastly, POSCO must continue its work to establish a flexible and creative corporate culture that excels in the 21^st century.

Despite all of the aforementioned challenges facing the steel industry, POSCO has continued to be a leader. Through innovation and a strong focus on improving the quality of its World Premium Products, POSCO is again well-positioned to lead the industry in 2017 – and in the years to come.