POSCO to lead China’s stainless market

By Kang Seung-woo

SHANGHAI ― Zhangjiagang Pohang Stainless Steel (ZPSS) has established itself as a leading player in the high-end stainless steel industry in China.

ZPSS, a joint-venture company between POSCO and China’s Shagang Group, is the world’s second-largest producer of the metal with an annual production capacity of 3 million tons ― 2 million from POSCO and 1 million tons from ZPSS ― behind Acerinox whose capacity is 3.4 million tons.

Along with production, ZPSS, founded in February 1997, has played a key role in promoting POSCO in the world’s most-populated nation and is treated as a role-model joint-venture company between the two countries. It also makes a case for POSCO’s push for global investment on the back of steady growth and successful localization.

The company, headed by President Kim Yong-min, has struggled in the past two years due to blows dealt by the global financial crisis and severe overcapacity from sluggish demand in the Chinese stainless steel market, but it expects to bounce back this year thanks to the economic recovery and its efforts to cut down costs.

So far in 2010, ZPSS has shown impressive numbers in its business categories.

As of September 2010, ZPSS has produced 620,000 tons of stainless steel and posted $1.52 billion (1.7 trillion won) in sales, up 46 percent from a year earlier. At this pace, it is expected to reach $2 billion at the end of this year.

Its operating profit has mounted a solid $33.4 million for the first three quarters, helped by quality differentiation and advanced technology, to gain the upper hand over competitors.

With its sights on becoming the world’s No. 1 stainless steel maker, ZPSS, an 82.5 percent stake of which is owned by POSCO, has started expanding its facilities and is striving to sharpen cost competitiveness.

“As the Chinese stainless market is facing overcapacity, ZPSS should reduce manufacturing and raw material costs and develop higher value-added products,” the president said.

“Through sustainable business activities, we will seek to turn into a company that can contribute to improving the Chinese stainless steel industry and the local communities.”

Localization

Since its establishment, ZPSS has made full-scale efforts to cooperate with the communities making significant efforts for localization.

It has been active in donating scholarship funds, equipment for education, charity service and sponsorship of local events.

For example, it donated $10 million in setting up an international school in Zhangjiagang in Jiangsu Province in 2007 and it collected $430,000 for a disaster relief fund, assisting the Sichuan earthquake in 2008.

The company, made up of 32 officials from POSCO and about 1,900 Chinese workers, focuses on training locals.

It provides each with 150-hour education programs a year, such as management, language, technical training and information technology (IT).

The time is much longer than that of other foreign companies in China, which usually offer about 40 hours.

In its efforts to nurture competitive local executives, it offers MBA courses at Tsinghua University, Peking University, Fudan University and Shanghai Jiao Tong University to managers and deputy manager-level officials.