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South Korea Metals Report Q1 2010
Business Monitor International, Jan 2010, Pages: 51
Business Monitor International's South Korea Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Korea's metals industry.
Except for a dip in February, South Korean crude steel output increased modestly but consistently in 2009 and total output should reach 18.01mn tonnes. In H109, South Korean crude steel output fell 17.2%, but output in Q2 was up 17.1% as the weak value of the Korean won, especially compared to the strength of the Japanese yen, boosted exports. The third and fourth quarters of 2009 saw continued improvements in South Korean export markets and a revival in domestic demand, with a 12% increase in demand for the country’s industrial power in November 2009 compared with the previous year, according to the government.
A powerful effect of the global financial crisis has been the fall in the competitiveness of Japanese exports due to the appreciation of the Japanese yen and the decline in value of the South Korean won, even though the latter has been picking up in 2009. International investors’ habit to use the yen as a ‘safe’ currency has been a boon for South Korean metals exporters in 2009 and, by the middle of the year the weaker won had made South Korean steel products 36% cheaper than Japanese production. Pohang Iron and Steel Company (POSCO) continued to pursue the next generation of its growth by pushing expansion overseas, moving into energy and non-ferrous projects. The world’s fourth largest steelmaker expand to Vietnam, Indonesia, India and Brazil as well as developing energy projects for its own use. As well as constituting an important strategic move for POSCO, its start in power generation will save the company substantial amounts. Cost-cutting has moved up the agenda since its third quarter results – revealing a 22.3% fall in revenue to KRW6.85tn compared to the same quarter last year – were in such stark contrast to its expansionist activity.
There is no doubt that Chinese demand is driving recovery and growth in the region and South Korea has been well-placed – having continued capacity improvements through the global financial crisis – to reap the benefits of Asian demand shored up by China’s stimulus package.
In the shipbuilding sector, however, China has edged closer to displacing South Korea as the world leader. It has been understood for some time that South Korea’s days in the number one spot are numbered, as China moves aggressively to overtake it. China’s long-term incentive to develop expertise in naval defence has led it to strongly support the commercial shipping sector, providing soft loans to buyers and producers alike. In December 2009 Bloomberg reported that China Shipbuilding Industry managed to raise US$2.2bn in the country’s third largest IPO, attracting orders from investors 50 times higher than available stock. This may be seen as a poll on the direction the top shipbuilding spot is heading in the next year.
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