S. Korean steel giant scraps Indonesian facility expansion
S. Korean steel giant scraps Indonesian facility expansion
SEOUL (AFP): South Korean steel giant Pohang Iron and Steel
Co. (POSCO) on Monday unveiled a drastic cut in facilities at
home and abroad to bolster its competitive edge.
POSCO, the world's second largest steel producer, said it had
scrapped joint-venture projects in Indonesia and China, along
with a plan to build new steel mills in South Korea.
"Drastic and consistent restructuring is needed to reduce cost
and enhance competitiveness," a POSCO spokesman said.
The company also decided to sell its joint-venture steel plant
under construction in Venezuela, he said.
"Construction of the US$330 million plant in Venezuela will be
completed in June to produce 1.5 million tons of hot briquette
iron a year," he said.
In Indonesia, POSCO earmarked $84 million to build a joint-
venture steel plant, but an economic meltdown there has delayed
construction, he said.
"We also decided to cancel projects for tin plate and
galvanized steel plants in China, where POSCO has already secured
a network of production and sales," he said.
POSCO officials worry that they may suffer enormous losses in
China if the country plunges into crisis. China is one of POSCO's
major clients.
They conceded that POSCO became more vulnerable to crisis
because of its over-grown facilities at home and abroad.
"By eliminating the bubble, the company will remain profitable
under any circumstances," the POSCO spokesman said.
Domestic steel demand fell 35 percent last year, forcing POSCO
to reduce production at 25.6 million tons last year. POSCO has
been the backbone of South Korea's industry, cornering some 70
percent of domestic demand.
The company posted a record net profit of 1.1 trillion won
($932 million) on sales of 11.1 trillion won last year, mainly
due to exchange rate gains.
POSCO's 1998 profit was up 51 percent from 728.9 billion won a
year ago, helped by brisk exports estimated at $2.7 billion last
year.
The company saved 237.7 billion won in capital expenditure
last year by scrapping facility construction and reducing
inventory. It also cut financial costs by 41.4 billion won by
reducing borrowings.
As a result, POSCO said its debt-to-equity ratio stood at 114
percent at the end of last year, down from 141 percent a year
ago.
The company plans to cut its production further this year at
24 million tons, based on predictions that the global steel
market would remain weak.