Seoul: Asia’s third biggest steel maker by output, Posco Ltd, reduced costs by $1.1 billion (Rs4,334 crore) last year in an effort to weather increased raw material prices, according to CEO Lee Ku Taek.
The “global steel industry is still facing some difficulties, including soaring raw material prices, intensifying competition and trade disputes,” Lee said in a new year speech to employees, a copy of which was emailed to Bloomberg. He did not elaborate on how they achieved the cost-saving.
Posco was among steel makers that reported lower third- quarter profit as iron ore, coal and shipping prices rose. Lee’s cost-saving figure for 2007 is higher than the 871 billion Korean won (Rs3,706 crore) earned by the South Korean company in those three months.
Contract iron ore prices have tripled in the past five years, driven by rising demand led by steel makers in China. The benchmark price of the ore for the year starting in April may gain more than 50%, Goldman Sachs JBWere forecast on 21 November.
On Wednesday, shares of Posco closed at 576,000 won, up 0.2%, in Seoul trading compared with a 0.7% fall on the benchmark Kospi stock index. The shares rose 86% last year, overtaking Nippon Steel Corp. as Asia’s biggest steel maker by market value.
The steel maker will press ahead with the planned construction of a $12 billion steel mill in India, Lee said in the speech, reiterating recent comments that the venture will proceed. Construction on potentially India’s biggest investment from overseas has been delayed for almost a year as Posco couldn’t secure a mining permit, and the land hasn’t been cleared of occupants. “Despite obstacles and difficulties, Posco will make clear progress on the Indian steel project this year,” Lee said in the new year remarks, without giving details.