By Kang Seung-woo
Steel giant POSCO has aggressively expanded its business portfolio in the materials and eco-friendly sectors in a bid to seek new growth engines, and transform itself into a comprehensive material corporation.
In accordance with the goal, POSCO and its affiliates have worked with institutions from industry, academy and research institutes including the Research Institute of Industrial Source and Technology (RIST) for open innovation - a paradigm that assumes that firms can and should use external ideas as well as internal ones.
POSCO is also focusing on the production and supply of high-powered, ultra-light basic and innovative materials, which are believed to be a catalyst for green growth.
“POSCO has contributed to the nation’s industrial development with its impressive achievements. From now on, POSCO will try to take off in new materials fields,” POSCO Chairman Chung Joon-yang said.
Due to today’s global trend towards nationalism in natural resources, and unstable material prices, many countries have rushed to secure natural assets.
In addition, although the market for high-value materials, such as magnesium, lithium and titanium, are expected to grow rapidly, their reserves are not likely to match potential demand in the near future.
POSCO, which has been promoting its magnesium business since 2002, was selected as the supervising institution for the “Ultra-lightweight Magnesium Material for Transport Planes” business – one of the 10 plans which belong to the World Premier Material (WPM) project in August 2009.
The WPM plan is government-run with funds totaling 1 trillion won and it aims on fostering the world’s leading materials industry to commercialize and create new materials.
The magnesium business with which POSCO is charged is focusing on commercializing magnesium plates and high strength bulk materials used for the exterior of transport planes and it is expected to increase fuel efficiency and prevent pollution.
Magnesium sheets, recognized as a metal of the future, have a consistent durability and flexibility and are easily formed into various hard cases for mobile devices such as mobile phones, PDAs, laptop computers and steering wheels. These sheets are 25 percent and 70 percent lighter than steel and aluminum, respectively, and are better for recycling and electromagnetic wave isolation than plastic. Currently, demand for magnesium sheets has sharply increased, especially for making accessories for mobile electronic devices.
In addition, POSCO completed building a magnesium sheet plant in Suncheon, South Jeolla Province, in July 2007 in its bid to tap demand for a metal increasingly used in mobile phones, computers and cameras. The facility that it invested 22.5 billion won can produce 3,000 tons of magnesium sheets annually.
POSCO’s signed a memorandum of understanding (MOU) with Gangwon Province on the magnesium refinery business in December 2009.
According to the deal, POSCO will build a magnesium refinery plant with annual production capacity of 10,000 tons in Gangneung, while the province promises to give all the necessary financial and administrative support, including land and road construction.
“POSCO will be aggressively pursuing projects, including a magnesium refinery and other functional non-ferrous metals such as titanium, zirconium and silicon, and future materials such as lithium, carbon and nano powders, as the new growth engines for the future growth of the company,” its chairman said after inking the MOU.
POSCO anticipates that the completion of the new plant will enable it to use the products for its own magnesium sheet plant and sell the rest to local businesses in need of magnesium.
Among a variety of materials, POSCO, the world’s third-largest steel producer, first targeted nickel, which is a core raw material to produce stainless steel and one of six strategic minerals named by the Korean government.
In 2006, the Pohang-based company, which was determined to develop and refine a nickel mine to stabilize its nickel supply for stainless steel production, agreed to a deal with SMSP, the biggest nickel exporter of New Caledonia Island, to form two joint ventures – NMC, a nickel mine development company and SNNC, a nickel processing company. New Caledonia holds the largest nickel reserve in the world.
NMC, located in New Caledonia, supplies nickel ore to SNNC in Gwangyang, South Jeolla Province for 30 years, while SNNC produces 30,000 tons of nickel for POSCO every year.
The cost of nickel accounts for 70 to 80 percent of the stainless steel making cost and by producing it on its own, POSCO can save $400 to 500 million used for importing nickel and will be able to respond effectively to the fluctuation of nickel prices.
“The deal enabled POSCO to solidify its status as a world-class stainless steelmaker by completing an integrated system of nickel mine development, refining and manufacturing nickel,” a POSCO official said.
POSCO will try with the government to commercialize technologies to extract lithium from sea water.
The firm signed an agreement on the joint project in February last year with the Ministry of Land, Transport and Maritime Affairs and the Korea Institute of Geoscience and Mineral Resources (KIGAM).
POSCO and the ministry will invest 15 billion won and 30 billion won, respectively, until 2014.
POSCO expects to produce 20,000 to 100,000 tons of lithium carbonate in the facility. Korea’s annual demand for the mineral is tallied at some 5,000 tons but the country depends on imports for the whole amount.
As the industrial demand is forecast to grow to 20,000 tons per year, the project will be able to replace projected imports of up to $200 million, as well as create an economic effort of $800 million in lithium exports, the company said.
Lithium is the material of secondary batteries used in electric cars, mobile phones, and laptops, and is a resource that can also be used in next-generation nuclear fusion power development. Many countries around the world are scrambling to secure lithium as it is forecasted to be exhausted within 10 years.
Bolivia has more than half of the world's lithium reserves in such places as Salar de Uyuni high in the Andes mountains and a lot of nations, including Brazil and Japan, have been working aggressively to secure larger shares of the South American country’s lithium resources.
Korea, which lacks natural resources, has also joined the race, as POSCO and 12 companies including the state-run Korea Resources Corp. (KORES) has conducted research for Bolivia to conduct joint research projects to determine the ideal infrastructure needed to make best use of the material.
In April 2010, POSCO and Kazakhstan’s UKTMP reached an agreement for a joint venture to produce titanium slabs.
The deal says that each side will invest 50 percent to build an industrial pure titanium slab plant in Ust-Kamenogorsk, eastern part of Kazakhstan, with construction starting in the latter half of this year for completion in 2012.
If the plant is completed, Korea will become the fourth nation in the world to produce titanium slabs following Japan, Russia and the United States.
Titanium is a high quality material used in chemical plants, or nuclear power plants and desalination facilities as it is strong against corrosion yet light and high in strength. Though its cost is more than 20 times that of general steel materials, Korea has relied entirely on imports as there were no domestic manufacturing facilities.
POSCO set up POS-HiMetal to tap into the ferromanganese manufacturing area in September 2009.
The ferromanganese producer broke ground for its plant in April 2010 and will open in September this year and the 75,000 ton facility will be located near the new steel plate mill within Gwangyang Steelworks. The high purity FeMn produced will be used for producing high manganese automotive steels.
High purity FeMn is used as sub-material in the production of high manganese steel for automobiles. Until now, solid manganese metal was imported from China, but with the supply becoming unstable, there has been an increasing need for a stable supply high purity FeMn.
The steelmaker has also stepped into the synthetic natural gas (SNG) business of late, as it signed an deal with South Jeolla Province in November last year to invest 1 trillion won in building a SNG manufacturing plant with an annual capacity of 500,000 tons in Gwangyang by 2013.
The SNG project is a field the government is nurturing as a new growth engine to realize low-carbon green growth and can replace LNG which fully relies on imports and help the company save 200 billion won on imported natural gas.
With the job creation of 450,000, the project is estimated to increase the competitiveness of Korean steel producers.
SNG is a clean fuel which can replace LNG. Currently, there is only 1 commercial plant in the U.S. which is in operation globally, while there are other plants in commercialization stage in China and Japan.