Posco to spend 1.4T won to boost steel output

SEOUL—Posco, Asia’s third-biggest steelmaker, will spend 1.4 trillion won ($1.4 billion) to boost production to meet rising demand from shipbuilders and carmakers.

Capacity will expand by 2 million metric tons by 2010 with the construction of a new plant in South Korea, the Pohang-based company said in an e-mailed statement Thursday after holding a ceremony to mark the start of construction. That’s a 6.4-percent gain from last year’s output.

Steel prices have surged to records globally as producers haven’t invested in enough new plants to keep pace with rising Asian demand. The expansion will increase operating profit by 7 percent from this year, according to Posco.

“It’s a positive move,” Lee Won Jae, an analyst with SK Securities Co., said in Seoul. “Solid steel demand enables Posco to make such investment. Hot-rolled coils and shipbuilding steel, in particular, are in shortage.”

Posco rose 1,000 won, or 0.2 percent, to 511,000 won at 12:23 p.m. in Seoul trading Thursday, compared with a 1.6-percent advance in the broader benchmark Kospi index.

The company will increase annual operating profit by 410 billion won after 2010 as the expansion will boost output of hot-rolled coils, ship-plates and billets, it said.

Posco last week boosted its full-year earnings forecast by 19 percent after posting a record second-quarter profit. The steelmaker has increased prices 63 percent this year, more than covering the increase in materials costs.

“For a company like Posco with sufficient capital, it won’t be any problem to finance the project,” SK’s Lee said.    

Prices of steel plates used to make ships may gain as shortages will persist in Asia until 2010 because of demand from shipyards in China and South Korea, Mirae Asset Securities Co. said in February.

Posco said April 1 it wants to boost annual crude-steel output, including overseas production, to more than 50 million tons over the next decade from 31.1 million tons last year.

Competitor Baosteel Group Corp., China’s largest mill, plans to increase capacity to 80 million tons by 2012 from 30 million tons now. (Bloomberg)

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Posco to spend 1.4T won to boost steel output

SEOUL—Posco, Asia’s third-biggest steelmaker, will spend 1.4 trillion won ($1.4 billion) to boost production to meet rising demand from shipbuilders and carmakers.