POSCO (PKX) recently announced that its Mexico CGL (Continuous Galvanizing Line) has started shipping its first products on June 25. The Mexico CGL, which will annually produce 400 thousand tons of high-end zinc-plated steel alloy plates and zinc-plated steel plates for automobiles, began its commercial operation on June 4.
The company is focusing on rapidly increasing the proportion of value-added products, such as cold-rolled steel, automotive steel plates and electric steel sheets, in its product mix. POSCO expects demand for steel plates in South Korea to rise to 16 million tons by 2011 from 10.7 million tons in 2007.
In July 2008, POSCO started the construction of a 2 million ton capacity steel plate plant at Gwangyang Steelworks in Korea. The company targets to complete the construction of this plant by October 2010. Upon completion of the plant, POSCO’s steel plate production will reach 7.25 million tons by 2011.
To improve its position as a global automotive steel sheets supplier, POSCO is focused on expanding its automotive steel plate production base outside South Korea and establishing a global service system. Mexico CGL is POSCO’s first production base out of North America. The company further plans to expand its presence in potential markets in Latin America like Peru, Chile and Argentina, as well as in Southern Europe and North Africa.
Given the company’s focus on increasing the proportion of higher margin products in its sales mix, we expect POSCO to outperform its peer group in terms of revenue growth and earnings.
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