Government: "Pohang Steel Plant 'Difficult to Normalize Within This Year'... Sales Damage '2 Trillion Won'"

Interim Results of Steel Supply and Demand Survey Team... Normalization Expected in Q1 Next Year
POSCO Sales Decrease by 2 Trillion Won... Estimated Partner Company Damage 250 Billion Won
"Pohang Steelworks Facility Improvement Needed... Continuous Facility Investment Required"

The Pohang Steelworks 3rd Heavy Plate Plant, which resumed operations on the 24th of last month. [Image source=Yonhap News]

[Asia Economy Sejong=Reporter Lee Jun-hyung] Contrary to the company's position, the POSCO Pohang Steelworks in Pohang, Gyeongbuk, which suffered flood damage from Typhoon Hin Nam No, is expected to return to normal operation around the first half of next year. The government stated that there were shortcomings in POSCO's response to the flood damage.

The Ministry of Trade, Industry and Energy announced on the 14th that the public-private joint "Steel Supply and Demand Investigation Team" investigated the Pohang Steelworks damaged by the typhoon and reported accordingly. Earlier, in September, the ministry formed an investigation team consisting of 10 experts from the steel industry to assess the damage scale at Pohang Steelworks and propose countermeasures. The team conducted three on-site investigations at Pohang Steelworks from September to recently and reported interim results to the ministry.

As of the 10th of this month, the investigation team reported to the ministry that 6 out of 18 product plants at Pohang Steelworks have been restored. Nine product plants are expected to resume additional operations within this year. The team anticipated that when the remaining two plants, including the plating plant, resume operations around the first quarter of next year, POSCO's facilities will return to the pre-typhoon damage level.

＜YONHAP PHOTO-2875＞ POSCO Pohang Steelworks, All Blast Furnaces Operating Normally, Focused on Recovery of Rolling Process
(Seoul=Yonhap News) POSCO Pohang Steelworks announced on the 15th that all blast furnaces began normal operation on the 12th and that it has shifted to a "focused recovery system for the rolling process" to fully restore the rolling process. The photo shows the Pohang Steelworks site flooded by 110mm of heavy rain per hour in the early morning of the 6th. 2022.9.15 [Provided by POSCO. Redistribution and DB use prohibited]
photo by Yonhap News/2022-09-15 14:01:40/
＜Copyright ? 1980-2022 Yonhap News Agency. Unauthorized reproduction and redistribution prohibited.＞

"Normalization Possible Around First Quarter of Next Year"

Initially, POSCO emphasized "normalization within this year." This means there is nearly a three-month gap compared to the restoration timeline announced by the investigation team. In particular, the restoration timeline for Pohang Steelworks' 1st hot plate mill has not yet been identified. This is why Vice Minister Jang Young-jin explained in a briefing that "except for the 1st hot plate mill, all other plants will resume operations in the first quarter of next year, contrary to earlier information."

There is expected to be no significant disruption to domestic steel supply and demand. POSCO is increasing production at the Gwangyang Steelworks and importing some steel to minimize product reduction. Accordingly, the investigation team believes the possibility of steel supply instability until the end of this year is low. A ministry official said, "So far, there are no supply and demand issues in the steel market," adding, "This is also related to market inventory levels and demand reduction due to the economic downturn."

The sales damage to POSCO due to the flood is considerable. The investigation team estimates that POSCO's sales will decrease by about 2.04 trillion KRW due to typhoon damage. The sales damage to POSCO's partner companies is estimated at about 250 billion KRW.

This is why the government designated Pohang City as a proactive industrial crisis response area. When designated as such, the government injects emergency management stabilization funds and provides financial support. The Ministry of Trade, Industry and Energy, the responsible ministry, is reportedly considering support in the range of 600 billion to 700 billion KRW for Pohang City. Vice Minister Jang said, "(The support scale) is under consultation with the budget authorities," and added, "We will provide maximum support so that steel industry partner companies, which are part of the national key industries, can quickly return to the field."

Vice Minister Jang Young-jin Presiding Over the Business Restructuring Plan Deliberation Committee
(Seoul=Yonhap News) Jang Young-jin, Vice Minister of the Ministry of Trade, Industry and Energy, is presiding over the '35th Business Restructuring Plan Deliberation Committee' held at Lotte Hotel in Jung-gu, Seoul. October 12, 2022 [Provided by the Ministry of Trade, Industry and Energy. Redistribution and DB prohibited]
Photo by Yonhap News
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Investigation Team Recommends Mandatory BCP

However, the investigation team also believes that POSCO bears considerable responsibility for the typhoon damage. Accordingly, the team recommended that POSCO improve facilities such as drainage systems and self-power generation equipment. In particular, the team pointed out the need to improve the drainage system considering the possibility of flooding caused by river overflow. The team concluded that it is necessary to consider installing structures such as barriers at predicted external water inflow points.

Additionally, the team reported that POSCO should supplement self-power generation facilities to prepare for power outages caused by substation flooding. The team also emphasized the need for continuous facility investment regardless of POSCO's sales decline.

There was also a suggestion that POSCO should establish a "Business Continuity Plan (BCP)" including disaster preparedness and recovery operations. This was based on the judgment that POSCO's existing disaster preparedness manual was limited to a general manual for common disasters. Accordingly, the investigation team proposed to the government that not only POSCO but also companies classified as national key industries should be mandated to establish BCPs capable of maintaining stable supply chains during emergencies such as typhoons and earthquakes.

Meanwhile, the investigation team plans to specify the BCP establishment recommendations by the end of this year. The final judgment on the impact of the Pohang Steelworks flood damage on steel supply and demand will be made after the fourth on-site investigation scheduled for mid-December, following the restoration of the 2nd hot rolling mill where a fire had occurred. The team plans to submit the final report to the Ministry of Trade, Industry and Energy by the end of this year, synthesizing the results of the fourth on-site investigation and others.

This content was produced with the assistance of AI translation services.