Posco banks on global demand for steel in Vietnam

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Posco banks on global demand for steel in Vietnam

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Left: Posco-VNPC, 50 kilometers from Hanoi, mostly serves Japanese appliance makers like Panasonic and Fuji Xerox and Korea’s Samsung Electronics and LG Electronics. Right: Posco workers process steel. [POSCO]

HANOI, Vietnam - In a strategic location between Vietnam’s capital city Hanoi and Haiphong, home to various manufacturing facilities, the nation’s largest steelmaker Posco operates a steel processing center with aims to snatch up overseas demand for processed steel.

Posco-VNPC (Vietnam Hanoi Processing Center) founded in 2009, is located in Hai Duong, 50 kilometers (31 miles) east of Hanoi and is one of 12 corporations the steelmaker operates in Vietnam. These corporations are affiliates of Posco Vietnam Holdings, which covers legal and managerial issues of all the steelmaker’s corporations in Vietnam.

Among the steel-related corporations, excluding affiliates such as Posco Energy and Posco ICT, there are four steelmaking corporations for cold-rolled steel, shape steel and iron bars and two processing centers. There’s one in the southern area of Vietnam and another in the north that enables Posco to produce, process and sell steel products across Vietnam and also to neighboring countries in Southeast Asia, including Thailand and Malaysia.

When the Korea JoongAng Daily visited Posco-VNPC, the northern Vietnam processing center, last Thursday, four steel processing lines were actively punching out cut steel. A slitter, which cuts steel coils in vertical lines into narrow rolls, stood nearest the entrance. Two machines cutting horizontal lines were in between. Coils were shaped into a rectangular sheet, so they could be piled, packed and delivered. The shaping follows customers’ requirements and might be used in smartphones, home appliances or cars.

Posco-VNPC mostly serves Japanese home appliance makers like Panasonic and Fuji Xerox and also Korean players Samsung Electronics and LG Electronics. These companies’ facilities are mostly near Hanoi and Haiphong. Relatively new customers include Canon and Brother, both Japanese office automation product suppliers.

As LG expanded its facilities in Haiphong last year, the company is expected to become the processing center’s main customer, according to Jeon Kwan-su, general manager of Posco-VNPC.

The center supplies steel for in-vehicle infotainment, such as audio and navigation, and home appliances including washing machines and vacuums.

Due to an increased customer base, Posco-VNPC’s sales of 14,000 tons of steel in 2009, when the center was founded, grew to 240,000 tons last year. Last year’s sales increased about 50,000 tons from a year earlier as the company was able to discover new customers.

“As Samsung Electronics and LG Electronics, which used to actively do business in Thailand and Malaysia, gradually expand their presence in the Vietnamese market, there are more chances for Posco to offer services to these companies,” said Kim Sun-won, president of Posco Vietnam Holdings.

As global home appliances and carmakers located their manufacturing plants overseas to find new customers and bank on cheaper land and labor costs, steelmakers have set their sites overseas. Vietnam has been an important market in the rate of their growth.

“If there was enough demand back at home, we wouldn’t have to focus so much on overseas expansion, but we have to be closer to market demands and Vietnam plays an important market,” said a spokesperson from Posco.

According to accumulated data from Korea Investment-Trade Promotion Agency, Vietnam has been growing at a steady pace of about 5 percent per year for the last five years. As the economy grows and government fosters manufacturing industries, demand for steel products grew for construction, shipbuilding and home appliances and automobile making.

Posco saw an opportunity to set foot in the country 25 years ago, setting up an office in Hanoi. Since then, the steelmaker has invested more than $2 billion to ramp up its business in Vietnam.


BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]

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