POSCO Rises With Vertical Integration
By Kim Yoo-chul
Staff Reporter
POSCO has seen its market capitalization going down just like most companies due to the ongoing financial crisis.
But by a stroke of pure luck, the Korean steel maker is seeing a gap in market capitalization totals with its bigger rival ArcelorMittal. This is because the world's biggest steel maker's stock prices are falling like a rock.
Feeling the chill, the global leader is making plans for rationalization.
ArcelorMittal said it plans to cut production by 30 percent globally, and was temporarily shelving its expansion plans in the face of falling steel prices and the ongoing financial crisis.
The company had earlier announced a massive investment plan of $50 billion to increase its steel capacity to 130 million tons from by 2012.
However, the company's share price has dropped by more than 60 percent since its peak on June 6 as a commodity boom ended and demand declined. Its third quarter sales and profits announced Wednesday were below market estimates.
Specifically, ArcelorMittal, whose asset value reached some $145.2 billion in the first week of June ― nearly triple POSCO's $49.9 billion ― decreased to $34.6 billion in assets as of November 5.
"The asset gap with ArcelorMittal narrowed $9.85 billion from $85.4 billion in five months. Mittal expanded its footprint via M&As, however, some steel plants that Mittal acquired are showing a lack of competitiveness in terms of price and product quality," POSCO spokesman Kim Dong-wan said, Friday.
POSCO clarified it doesn't have any immediate plan to reduce production output as it has already secured larger and stable overseas clients, as well as having taken the lead in terms of technology and prices over its rivals.
"The ongoing bearish moves seen in the global steel industry might offer a chance for POSCO to go one-step further. Time is on POSCO's side to seek an M&A opportunity in the steel industry," Lee Chang-mook, an analyst at Woori Investment said.
Global demand for steel fell 3.3 percent in September and is projected to fall 5 percent in 2009, according to research firm World Steel Dynamics.
Earlier, POSCO was kicked off from Hanwha Group as the preferred bidder for Daewoo Shipbuilding & Marine Engineering (DSME) and the steel maker is now monitoring overseas markets for M&A chances as some companies might be up for sale in 2009 if the global economy slows further.
POSCO's Kim said it would be able to use the 3 trillion won and 4 trillion won it had planned to buy DSME.
In October, POSCO and Japan's Nippon Steel struck a joint partnership in POSCO's Vietnam cold-rolled steel plant.
The national player is also set to invest 1.8 trillion won and 1.4 trillion won in upgrading facilities and building a new plant, respectively, by 2010, to spur its ongoing moves of "vertical integration."