POSCO may launch emergency operations from next month to cope with the slowdown in the world economy, the excess output of steel products, and no sign of recovery yet in sight. Chairman Chung Joon-yang in what will be called the Innovative Festival, or IF, will officially declare the event on Dec. 5, officials of the steelmaker said recently.

POSCO has had to resort to tight management to overcome various tough problems in its operations including a shortage of cash on hand, with its operating profit in the third quarter down around 25 percent YoY at 819 billion won, and international credit ratings agencies such as S&P and Moody’s downgraded POSCO’s credit ratings to BBB+ to A- and from Baa1 from A3 respectively.

POSCO has internally divided its operation status from S1 to S5, with the current status between S3 and S4, and the steelmaker is preparing to adjust its operation to the S5 level from next month to make it most effective to cope with various difficulties, the company said recently.

Ever since the early part of this year, POSCO has been taking on restructuring to streamline the operations of the non-major companies that the steelmaker acquired, starting with Daewoo International in 2010. Among its plans are the merger of POSCO Emtech, a steel product packaging firm, its affiliate Rico Metal, and Nine Digits. POSCO AST will be merged with POSCO NST in January and the steelmaker is also pushing the merger of Song Geotech with POSCO Plantech. The steel industry all over the world is going through a great crisis, but POSCO has been doing all right so far with its credit rating one of the highest in the industry, officials of the POSCO said.

Since 1992, before the opening of diplomatic relations with China, POSCO has been exporting its steel products to China through Hong Kong.

In 1991, the steelmaker set up an office in Beijing to take care of its operations in China, including exports, production of steel products, and investment in a coil production center. By April 2012, the steelmaker’s operations expanded substantially to include 49 local subsidiaries manned by the officers and staff on assignment from its head office and steel plants in Korea and over 6,500 local employees.

China, meanwhile, expanded its economy rapidly to the extent that its steel production totaled 680 million tons, 48 percent of the world’s total steel output.

POSCO, in order to strengthen its operations in China, set up POSCO China in 2003 and sped up its localization. The wholly-owned local subsidiary has been taking charge of such management matters as personnel, development activities for new steel products in demand in China, as well as management of POSCO operations in China since its set up including labor, education and technology exchange and managing the sales outlets in such key cities as Shanghai and Guangzhou and other cities and areas in China.

The local subsidiary has also been busy taking care of such key areas of operations as technology cooperation, joint ventures, and information exchange with local steelmakers.

POSCO China has been working hard to win public support in China not only for its products, but also its social activities such as through the donation of scholarship funds to local universities and raising funds for disaster-stricken areas. 

One of the outstanding examples of joint venture with local businesses has been Zhang Pohang Stainless Steel, which has become a model case of a joint venture between Korean and Chinese firms. The j.v. company was set up in 1997 between POSCO and Zhang Shukang Collective Company to set up a stainless steel maker in China. The first steel plant by the j.v. company was completed in 1999, capable of turning out several thousand of stainless steel plates. With the approval of the Chinese government, the j.v. company began the construction of its second plant in December 2001, with the new equipment imported from overseas.