Posco plans investment surge

South Korean steel producer Posco plans to more than double its capital spending over the next five years to fund expansion of its core steel-producing operations, as well as growth initiatives such as lithium mining and natural gas production wells.

Capital spending over the next five years will rise to a combined 45 trillion won ($40.4bn) from the W18 trillion that was budgeted for 2014-18. Hiring will accelerate similarly, as the company plans to create 20,000 new jobs during 2019-23, up from 7,000 over the previous five years.

Posco earmarked about 58pc of its capex budget, or W26 trillion, for investments in its steel businesses. These projects will include an expansion of the No.3 blast furnace at its Gwangyang steel works, a new plant for making high-strength automotive steel and a new power plant fuelled by by-product gas to increase mill energy efficiency.

The company did not disclose capacity figures or timelines for its new steel-producing facilities. Posco already has five "super size" blast furnaces, exceeding 5,500m³ in volume, including the No.1 unit at Gwangyang and the No.3 furnace at its Pohang steel works that was expanded last year.

Posco last year completed a 500,000 t/yr galvanising plant at Gwangyang that exclusively produces the company's "giga steel", a high-strength steel for automakers.

The capital budget includes W10 trillion for lithium extraction and other investments in Posco's lithium battery materials business. The company last month agreed to buy lithium mining tenements in Argentina from Australia's Galaxy Resources for $280mn.

The other W10 trillion of capital spending is budgeted for Posco's power business, especially renewable energy projects, and the company's upstream gas business in Myanmar (Burma).

Posco, which produced 9.38mn t of crude steel in the April-June quarter, ranks as the world's fifth-largest steel producer by capacity.