ArcelorMittal Chairman Lakshmi N. Mittal poses with POSCO Chairman Kwon Oh-joon, a member of the World Steel Association Executive Committee, after the former accepting the Innovation of the Year Award from the latter at the 48th WSA annual conference in Moscow, Russia, Oct. 5, 2015. (Photos:POSCO)
POSCO and ArcelorMittal are in talks to cooperate on R&D and marketing each other’s steel production technology and the sale of each other’s steel products around the world. The two large steelmakers are likely to come to an agreement in the first half and sign a contract to cooperate in the global steel market from the second half of next year, industry sources said Dec. 23.
If an agreement is signed, POSCO will be able to sell its premium steel products through the marketing network of the largest steelmaker in the world, ArcelorMittal, while ArcelorMittal will be able to access the new steel production technologies developed by POSCO.
ArcelorMittal, with over 300,000 employees, operates in over 60 places around the world including Europe, Asia, Africa and North America while POSCO ranks as the 5th-largest steel maker in steel output, and leads in steel production technology in the world. The two rival steel makers have decided to join hands in the areas of R&D and marketing with the global steel market in its worst doldrums, despite the fact that POSCO was once on the ArcelorMittal’s hostile takeover list in 2000.
They were rivals for over a decade and they are about to join forces to break out of the current slump in the global steel industry with the slump so severe that they have been pushed to join hands together.
The talks between the two giant steel makers licked off when Chairman Kwon Oh-joon met Chairman Lakshmi Mittal at a global steel event at the end of last year. Kwon told Mittal that POSCO has many new steel production technologies, but POSCO has not been able to use them by itself due to its limited distribution network around the world. Kwon proposed a tie up between the two steelmakers to sell steel products.
POSCO shipped samples of some of its steel products such as hot-rolled and cold-rolled steel plates, to ArcelorMittal Research Center for study and the center returned the favor with a long report on the steel products, saying that they will favorably consider the proposal on joint marketing.
Chairman Kwon wanted to team up with ArcelorMittal because POSCO wanted to produce and sell high value-added steel products with a strategy that calls for boosting its sale of premium steel products to around 50 percent of its annual sales by 2017. Last year, POSCO’s overseas sales exceeded its domestic sales for the first time, with the share of premium steel products in sales coming to around 40 percent of the total.
Kwon plans to explore the global market for premium steel products, which comes to around 10 percent of the 1.5 billion ton-output of all steel products produced annually by steel makers around the world and the prices of premium steel products staying unchanged even during the slump in the global steel market. POSCO wants to take advantage of the situation by boosting the output of premium steel products.
Once the two steelmakers agree on cooperation, POSCO may be able to sell its steel through the vast global network of ArcelorMittal, while sharing its top steel technologies with the partner.
There are also some steel sources who said POSCO needed to do something as it might have to set up a global marketing subsidiary to market its products around the world at a time when it has been chopping off many of its affiliates and overseas subsidiaries to reduce its financial burden. Other sources also note that POSCO might go for similar tie-ups with other steel makers overseas.
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