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On March 31 the board of China's biggest steelmaker, Baoshan Iron and Steel, passed a long-term development plan that calls for increasing annual output to 50 million tons, which is double its current capacity.
The plan includes an ambitious goal to leapfrog to the world's number two steelmaker spot, past POSCO, currently the world's fourth biggest steelmaker with annual capacity of 31.2 million tons, and displacing the current number two, Nippon Steel, whose capacity is 33.7 million tons.
Strong domestic demand has Baoshan increasing its output of value-added products like automotive steel sheet and stainless steel, which has POSCO worried. Baoshan already has a 51.7 percent share of the Chinese market for automotive steel sheet, with several multinational carmakers in China turning out vehicles made from Baoshan metal.
Besides Baoshan, China is home to four or five more steelmakers that produce nearly as much as POSCO. Companies like T'ang-shan are rapidly gaining on POSCO in terms of quality and price, milling steel that is nearly 90 percent as good as Korean product and more than 10 percent cheaper.
POSCO's strategy for dealing with the challenge is to enhance its price competitiveness by building new mills in India and Vietnam where raw materials are cheaper and more abundant. But POSCO's project in India has run into opposition from unhappy local residents.
Perhaps the biggest threat to POSCO is Arcelor Mittal, which became the world's top steel company through a series of mergers and acquisitions. Now the giant is threatening to seize control of POSCO.
The situation facing Korea's automobile industry is similarly grim. Hyundai and Kia are losing their price edge to Japanese competitors because of the recent strong won, and Chinese carmakers are growing swiftly and are just steps away from exporting to the U.S.
Chery, a Chinese carmaker, ranked number one in sales within China by selling 44,000 cars in March, beating out several rivals funded with foreign capital. The company exported 10,000 self-developed engines last year and is currently looking into selling compacts in the U.S. through DaimlerChrysler.
Like POSCO, Hyundai and Kia are looking abroad to solve their crisis. The car companies are cranking up production at overseas factories, building new plants and beefing up existing ones in the U.S., Europe, China, and India.
Bok Deuk-gyu from the Samsung Economic Research Institute said, "In 10 years, Chinese carmakers will threaten Korean carmakers in the small car sector in newly-emerging markets. To overcome these threats from China, Korean car makers should actively begin producing high quality cars and enhancing brand value."
(englishnews@chosun.com )
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