[FOCUS] Posco ready to regain reputation as top global player through restructuring

By Lim Chang-won Posted : February 19, 2018, 15:41 Updated : February 19, 2018, 15:41

[Courtesy of Posco]

 
SEOUL, Feb. 19 (Aju News) -- Posco, which used to be credited with spearheading South Korea's miraculous economic growth, is ready to regain its reputation as a top player in the global steel market after revamping its structure through years of painful restructuring, cost reduction and a strategic shift to higher-value products.

Posco has good reasons to remain upbeat. Its consolidated net profit last year rose to 2.97 trillion won (2.78 billion US dollars) from 1.048 trillion won a year earlier. Operating profit soared 63 percent on-year to 4.62 trillion won and sales rose 14 percent to 60.65 trillion won.

The company attributed its gains to brisk performances at its non-steel business and steel subsidiaries abroad. This year, Posco promised to invest 4.2 trillion won in new facilities in steel and non-steel businesses and set sales target at 61.9 trillion won.

Posco has sold non-core assets and reorganized its workforce and businesses amid a prolonged slowdown caused by oversupply and weak demands that have driven many steel makers to the corner.

In 2014, Posco responded to China's oversupply by diversifying into trading, engineering, and construction under a new strategy of "selection and concentration" led by CEO Kwon Oh-joon to focus on high value-added "World Premium (WP)" products.

Kwon's strategy paid off across the board. Some seven trillion won has been saved over a four-year period, and Posco has reduced the number of domestic affiliates from 71 to 38 and the number of overseas affiliates from 181 to 124.

Posco's operating profit hit a six-year high last year despite weak demands in auto, shipbuilding and construction industries. Sales of world premium products rose from 10 million tons in 2014 to 17.33 million tons last year.

The company has also tried hard to cut cost and strengthen customized solution marketing. Sales related to solution marketing jumped from 1.3 million tons in 2014 to 5.14 million tons last year.
 
However, Posco is not complacent. To cope with uncertain market conditions, it will strengthen profitability by making a preemptive investment to step up the production of high value-added and premium products.

In August 2016, Posco completed Southeast Asia's first automobile steel sheet plant in Thailand with an annual production capacity of 450,000 tons to supply premium steel products to global automakers such as Toyota, Nissan and Ford as well as parts makers.

In September of the same year, the company invested a $20.9 million in the United States to complete a wire rod processing center with an annual capacity of 25,000 tons, paving the way for the sale of high-quality auto parts and bearings which are not produced by local steel mills.
 
Posco's capacity to produce steel plate products for electronic vehicles has doubled to 160,000 tons. In April last year, No. 7 CGL (Continuous Galvanizing Line), which specializes in super-high-strength "Giga" steel, was completed.
 
And the company applied a plating control automation solution to its 3CGL factory and upgraded cold rolling mills under Kwon's push to "smartize" core equipment to provide differentiated products and customized solutions. 

"We will improve profitability by developing and selling WP (world premium) Plus products based on our proprietary technologies," a Posco official said. "We will strengthen our position in the domestic market with diversified products and strengthened solution marketing."
 
For steady growth, Posco has combined ICT in group businesses such as steel, energy and construction to be reborn as an eco-friendly and highly efficient steel company backed by artificial intelligence (AI).

After attending last month's CES 2018 in Las Vegas, Kwon said, "The convergence of AI and video technology will be widely and effectively used in steel and all other industries. This trend should be based on manufacturing, and POSCO must build a new smart manufacturing industry based on ICT technology.

As part of its strategy, POSCO signed a memorandum of understanding with General Electric (GE) to develop a smart factory platform optimized for steelmaking. The company will develop and commercialize a hybrid smart factory platform, "PosFrame+," that combines PosFrame, a smart factory platform, and GE's smart factory solution, APM (facility asset performance management solution).

POSCO will apply POSFrame smart solutions to group businesses such as construction and energy to enhance its competitiveness and build a new smart business model.  For its new growth engine, POSCO has also invested heavily in lithium-ion battery materials.

Most of the world's lithium production is in South America where the standard extraction technique is to evaporate water from brine with each batch taking from 18 to 24 months. Posco has developed its own technology to extract lithium phosphate from brine and convert it to lithium carbonate.

In 2012, POSCO ESM was established to produce cathode materials with an annual capacity of 7,000 tons and supply them to major domestic and overseas battery makers. POSCO Chemtech has succeeded in mass production of anode materials for high capacity electric vehicle battery.

In February last year, Posco completed a plant called "PosLX" capable of extracting 2,500 tons of high-purity lithium every year that could be used to produce batteries for 70 million notebook computers. The plant in the southern city of Gwangyang will supply its product to South Korean battery makers.

Posco will build two joint ventures with China's Zhejiang Huayou Cobalt to produce precursors and cathodes, which are used to make lithium-ion batteries. The joint venture established in China's eastern province of Zhejiang can produce 4,600 tons of precursors and cathodes each in the second half of 2020. Zhejiang Huayou accounts for about 50 percent of global cobalt production.

Posco has said the world's cathode market is expected to grow more than four times to 860,000 tons in 2020 from 210,000 tons in 2016. The development of lithium-ion batteries has increased global demand for lithium and related materials.

"Posco will actively advance into the data center and smart factory markets at home and abroad by accumulating smart manufacturing technologies," the POSCO official said. "The lithium-ion battery material business, which is part of our future growth engine, will gain momentum through the joint venture with the Chinese company."


 
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