Posco, South Korea's top steel maker, said on Wednesday it would produce 31 percent more steel plates in 2009 compared to 2006 to meet growing demand. Posco said in a statement that it would increase production of steel plates to 4.3 million tonnes in 2008 and to 4.7 million tonnes in 2009, from the current 3.6 million tonnes.
Steel plates, used mainly for building ships, account for about 11 percent of the steel maker's total production. The steel maker also planned to invest 90 billion won ($95.44 million) to refurbish its production facility.
"Posco expects industries that consume steel plates, such as shipbuilding, will continue to show a solid performance for the time being," the steel maker said.
South Korea's shipbuilding industry, which includes the world's biggest shipbuilder, Hyundai Heavy Industries Co, is expected to use about 6 million tonnes of steel plates this year.
But local steel makers produce only 4 million tonnes of steel plates combined and imports will be needed to make up for the shortfall, Posco said. Hyundai has an order backlog that would keep it busy for the next three and a half years, according to industry data.
Posco said the shipbuilding industry would continue to be strong at least until 2015, citing shipbuilding industry forecasts. The South Korean steel maker is slated to become the world's fourth-largest steel maker once Mittal Steel's takeover of Arcelor is completed. Posco shares were up 0.59 percent to 254,500 won as of 0243 GMT, outperforming a 0.32 percent fall in the broader index.
May's volume represented a decline of 38.2 percent in stainless steel inventory so far this year, to a level not seen since December 2004. "Due to output reductions, inventory levels of major producers including Posco fell from 68,000 tonnes in December 2005," said the official, who asked not to be named.
Last year, Posco cut its stainless steel output by 5 percent to stabilise steel prices. Global stainless steel prices had been falling in 2005 as China aggressively increased capacity and inventory levels rose. The company has also cut its crude stainless steel output by 2.74 percent in 2006.
"We had originally expected Posco's stainless steel business would stay under pressure this year, but demand for stainless steel is pretty strong, helped by steady economic activity," the official said.
"Local demand for 300-grade stainless steel is also very healthy despite soaring nickel prices," he added. The 300-grade uses costly nickel, while 400-grade uses chrome and very little nickel. Nickel prices have soared more than 50 percent in the past six months as investment funds pumped money into the metal.
Stainless steel is usually composed of steel, nickel, manganese and chrome. Shares of Posco rose 0.4 percent to 254,000 won, outperforming a 0.47 percent fall in the broader index.