POSCO Aims to Increase Non-steel Sales to 60% of the Total by 2068

Will we be able to consider POSCO as a steel company 50 years later? The steelmaker plans to raise its sales in the non-steel sector to 60 percent of its total sales by 2068 as it believes that it cannot to rely on the steel business alone for growth in the next 50 years.

On the contrary, Hyundai Steel and Dongkuk Steel are planning to focus more on the existing steel business by opening up the car market and manufacturing higher value-added products.

The constrating strategies of steel behemoth POSCO and the smaller companies are drawing analysts' attention. 

According to related industry sources on Sept. 9, the global steel market has been suffering from an oversupply caused by China since 10 years ago. In addition, the number of “mammoth” Chinese companies is rising. China boosted its annual production capacity from 600 million tons in 2008 to 1.1 billion tons in 2016 by expanding production facilities despite low demand of steel after the global financial crisis in 2008. Since then, the country has been seeking to grow in size.

A case in point is the merger of Baosteel Group, China's second largest steel firm, and Wuhan Steel Group, the sixth largest, in 2016. Baosteel, which trailed POSCO, the fourth largest steel company in the world, in terms of annual production, has become the world’s second biggest steel maker through the merger. POSCO, the world’s second biggest in 2001, dropped to fifth place last year.

Marking the 50th anniversary of its founding this year, POSCO aims to achieve consolidated sales of 500 trillion won (US$444.84 billion) by the centenary year of 2068. The non-steel business will account for 60 percent, or 300 trillion won (US$266.9 billion), while the steel business will take up 40 percent, or 200 trillion won (US$177.94 billion).

The company’s sales in the non-steel sector already account for more than half of the total but it is planning to boost the percentage further in the next 50 years. POSCO is betting on “new materials” to drive its future growth.

At a press conference right after taking office in July, chairman Choi Jeong-woo also said, “When we have a 20 percent share in the global energy material market in 2030, we will be able to generate sales of over 15 trillion won (US$13.35 billion."

In fact, POSCO inked a deal to acquire lithium mining rights in Argentina at the end of August to produce 500,000 tons of lithium every year in the next 20 years.

Considering the long-term deal to purchase lithium concentrate signed in February as well, POSCO will have the world’s fifth largest lithium production capacity by 2021. Lithium is used to manufacture an anode material, the main material of secondary batteries. A stable supply of lithium can lead to a synergy among the group’s affiliates. A battery, the core of electric vehicles, consists of value chains such as lithium, anode material and cathode material. POSCO manufactures an anode material and cathode material through POSCO ESM and POSCO Camtech, respectively.

Hyundai Steel and Dongkuk Steel still concentrate on the steel business. This is largely due to the fact that they don’t have enough resources like POSCO.

POSCO posted 1.25 trillion won (US$1.11 billion) in consolidated operating profit in the second quarter this year, crossing the 1 trillion won (US$889.68 million) mark for the fourth consecutive quarter. Its sales amounted to 16.08 trillion won (US$14.31 billion).

The sales and operating profits of Hyundai Steel came to 5.45 trillion won (US$4.85 billion) and 375.6 billion won (US$334.16 million), respectively, over the same period, while the figures of Dongkuk Steel stood at 1.51 trillion won (US$1.34 billion) and 32.3 billion won (US$28.66 million).