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PrintSouth Korea's top steelmaker POSCO said Thursday it will cut steel output by around 10% in December and January to shore up prices in the face of tumbling demand.
The steelmaker plans to slash production by 200,000 mt, or 7.3%, this month and another 370,000 mt, or 13.5%, in January, marking the first production cut since its creation 40 years ago.
POSCO produces some 2.75 million mt of crude steel a month.
With the decision, the world's fourth-biggest steelmaker will produce a total of 33.2 million mt of steel this year, down from its original plan of 33.4 million mt, the company said.
"We have delayed timing of output reduction, but today we made the decision as many of consumers are suspending production and falling export prices are also likely to hit profitability," POSCO said in a statement.
South Korean automakers, including market leader HyundaiMotor, main consumers of steel products, have been cutting output in the wake of weakening demand at home and overseas.
Industry analysts say POSCO's steel inventories are around 5 million mt as of the end of November, up from averaged 3.5-4 million mt, due to sluggish demand from the struggling construction and automobile sectors.
POSCO's local rival, HyundaiSteel has also decided to cut steel production by 300,000 mt in December and 180,000 mt in January, which marks a 20-30% cut from usual output, company officials said.
The Korea Iron and Steel Association expects combined crude steel production in South Korea to dip 1.6% next year, marking the first fall in 11 years due to a global economic slowdown.
The country's combined crude steel output would post 53.11 million mt in 2009, compared with this year's estimate of 53.97 million mt. This year's output is a 4.8% gain from 2007 when the country produced 51.52 million mt, which marked a 6.3% rise from 2006.
Despite the gloomy prospects, POSCO has said it would invest a record Won 6 trillion ($4.6 billion) next year to boost domestic capacity. The figure is nearly double the Won 3.4 trillion spent for this year.
HyundaiSteel also plans to spend more than Won 2 trillion this year to complete the building of new steelworks with two blast furnaces with a combined capacity of 8 million mt of crude steel annually to feed steel to its auto affiliates HyundaiMotor and KiaMotors. –Platts
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