During 1998, despite economic difficulties throughout Korea, Posco had invested a total of KW1.8 trillion in expanding facilities for high value-added products.

Also, around 70 per cent of Posco's 25 million tonne annual steel production will be sold in the domestic market to meet the local demand in the construction and infrastructure sectors, leaving 30 per cent for export markets.

The Korean economy, after the 1997 financial crisis, is witnessing a turnaround under the new government which partly in order to quell the unemployment problems, has initiated number of housing, construction and infrastructure projects.

The restriction on its expansion plans, will affect both Posco's production and exports. However, this situation hopefully will help the global steel prices to stabilise during the second half of 1999. In fact, steel demand from some of thesouth east Asian countries has been rising, resulting in slight improvement in steel prices.

Posco vice president Yoo, Byung-Chang, in an interview with The Financial Express at his Seoul office said: During 1999, our expansion plans are restricted by the restrictive policy of the government which prevents corporates here from making capital investments in 1999."

Further, Chang said: "As a responsible member of the global steel industry we have had to cut down our steel production by around one million tonne last year."

In line with the economic restructuring of major corporates in South Korea after the 1997's financial crisis, Posco too is currently engaged in restructuring its steel-making activities. "Our capital investments plans have been affected by the bubble economy status of Korea," says Chang.

Throughout the first half of 1999, steel prices have been sliding. Coupled with drop in demand (mainly from the south east Asian countries) the steel prices have dipped over 25 per cent in thefirst half of 1999. Part of this fall in steel prices is also attributed to increased selling by Posco. (The ratio of domestic to export sales has slipped to around 30 per cent in 1998-99 from over 50 per cent in mid-1995).

Of late, even the US steel industry has charged Posco of dumping steel in the US market.

For the first half period ended June 1999, Posco has reported a 13 per cent drop in its sales to Korean Won 5,115 billion. The company has predicted a further 7.7 per cent drop in in the full year to KW10,729 billion.

One of the major reason for fall in Posco's sale of steel products during the second half of calender 1999 and possibly in the next year to 2000, is the "restrictive" policy of the South Korean government led by opposition leader turned president Kim Dae-jung. Little wonder it feels a bit stifledAccording to Chang, Posco is currently underutilising its 28 million tonne steel-making capacity and produces only 25 million tonnes of steel annually.

Posco had plans to expand itssteel-making capacity by setting up number 2 mini mill in Kwangyang works and expansion of steel can material production capacity in its Pohang works and another blast furnace.

Further, amidst various overseas projects, Posco had plans to build a mini-mill and a stainless cold rolling mill in Indonesia. This plan too has been halted due to business uncertainties surrounded by the region's worsening economic conditions.

According to Chang, Korea is the highest per capita consumer of steel with around 1.13 tonnes per person.

Meanwhile, the company is concentrating its efforts to stabilise the unique corex technology. Last year it had completed a research of a technology that injects 15 per cent fine ore into the Corex. The feasibility of its new Finex technology injecting 100 per net fine ore into the Corex has already been proved feasible at a model plant with a daily capacity of 15 tonnes, and a pilot plant with a daily capacity of 150 tonnes is expected to be completed by end August this year.

SaysChang: The company's Corex facility at Pohang is half pilot and half commercial. It will take some more time to commercialise this technology."

Because of excess steel making capacity, the world steel production has been falling since 1996. From around 800 million tonnes in 1997, it had declined once again to 760 million tonnes in 1998.

Says an industry analyst: ``After the fall in production, the price slide has been arrested of late. Prices in 1999's second quarter has shown signs of improvement. ``In certain cases prices have improved by as much as 10 per cent. This has given hopes to industry to enhance production targets in current fiscal. But in this scenario, if a company is denied to make investments for incremental capacity expansion, it may miss volume game when price actually goes up."