For Posco, the world’s second-largest steelmaker based in South Korea, it gets worse. Weak domestic demand along with the climbing tide of low-cost Chinese imports create an increasingly difficult operating environment. To meet these pressures, Posco is making aggressive investments abroad and working to climb higher up the value chain. This change in strategy is aimed at decreasing competition in the global steel industry. South Korea is by far the most essential actor in ensuring that occurs.
The domestic steel market in South Korea has experienced major challenges in 2020. International economic slowdowns have led to decreased demand for steel products, which has hurt companies such as Posco. Competing in impossible local market realities. On top of that, it has to compete with a flood of low-priced steel imports from China that further undercut profitability. Analysts note that these factors have compelled Posco to reevaluate its business strategies and seek new avenues for growth beyond its national borders.
Posco is committed to addressing these persistent challenges. Amid big investments in overseas markets, the company is working to round out its product line. In that sense, the company is progressing farther up the value chain. Its goal is to manufacture better quality, more advanced steel products that can compete on the world stage. This strategy gives Posco an edge over competition while lessening the impact of domestic market volatility.
Home to steel giant Posco, the company is taking on the competitive windfall created by US-imposed affirmative applied tariffs. These tariffs have made a new and complicated layer to that complexity. Hence, these tariffs have had a devastating impact on South Korean steelmakers’ inability to access the very lucrative U.S. market. This leaves their revenue in a freefall. Consequently, Posco’s foreign investments are vital for its financial stability and market diversification.
Posco is not alone in this industry headwind. Hyundai Steel, another prominent player in South Korea’s steel sector, is attempting to break free from domestic constraints by exploring opportunities abroad. South Korea’s steelmakers have made a habit of aggressively courting investments abroad. This strategy allows them to navigate local challenges and continue to pivot with the evolving industry.