By Lee Hyo-sik
At every opportunity POSCO head Chung Joon-yang gets these days, he complains about bleak business conditions facing the world’s third largest steelmaker. He gripes about the surging prices of iron ore and other raw materials, and the global oversupply of steel products.
The CEO has not publicly said it but it is a widely-held belief that he wants to raise prices of POSCO’s products, a move that would certainly draw strong protest from shipbuilders and other companies that buy a wide range of goods from the steelmaker.
Critics point out that Chung has to take more troubled firms into account. They say that if Korea’s third largest firm in terms of market capitalization expresses hardship in conducting business its subcontractors are facing even tougher times.
A small manufacturer that supplies alloy steel to POSCO said it has been struggling to stay afloat over the past year, due to soaring raw material costs and intensifying competition.
``Our business couldn’t get worse than it is now,’’ said a spokesman for the company, which has its headquarters in Pohang, North Gyeongsang Province. ``POSCO and other large steelmakers have been making an all-out effort to reduce costs to cope with sluggish business. It goes without saying that we are facing even bleaker prospects.’’
He said his company signs a supply contract with POSCO every six months, saying the prices of its alloy products supplied to the steelmaker are at their lowest level.
``We are barely over the break-even point. We had to sign a contract at lower prices for the first half of this year than previous years, due to intensifying competition among alloy producers. Currently, we are living off what we earned in 2010 and 2011,’’ the spokesman said.
He hopes his firm can supply POSCO at higher prices in the second half and beyond. ``We expect the demand for alloy steels worldwide will grow toward the yearend. Then, things will get better for POSCO and suppliers like us.’’
At a meeting with Knowledge Economy Minister Hong Suk-woo Tuesday, the POSCO CEO said compared to shipbuilders, steel companies are struggling to cope with the prolonged sluggish business conditions at home and abroad.
``Shipbuilders are in a much better position than us. Some small firms are scrambling to survive but it is not so for large ones. But they asked us to help them,’’ Chung said.
POSCO posted sales of 39.2 trillion won in 2011, up 20.2 percent from a year earlier. But its operating and net profits both fell 12.3 percent to 4.2 trillion won and 13.6 percent to 3.3 trillion won respectively.
Shipbuilders have been calling on POSCO and other steel producers to lower prices of thick steel plate, citing the prolonged slump in the global shipbuilding industry. But Chung’s latest remarks indicate that POSCO has no intention of doing so.
``Some steelmakers lost money in the first quarter. The entire steel industry is in a dire situation. Reflecting rises in prices of iron ore and other raw materials, we think buyers should pay more for our goods,’’ he said.
leehs@koreatimes.co.kr