POSCO (Korea) government-built steel mill surpassing Nippon Steel

1972 — President Park puts Colonel Park in charge of building POSCO with US Steel's help. Thirty years later POSCO is the world's largest. Tom's evidence that integrated steel plants are now built by countries, not companies.

Korea decided in 1972, just after Bethlehem — President Park took Colonel Park, his chief of staff, and said "you're in charge of POSCO Steel, our new steel company." And the government of Korea teamed up with U.S. Steel and built POSCO Steel. 30 years later they surpassed Nippon Steel as the world's largest steel company in the 1990s. What happened after that? The Chinese started making lots of steel, and Bao Steel is the world's largest steel company today. Countries build steel plants.

Cited as the largest steel company in the world by late '90s, built by the Korean government as the only way to finance an integrated steel mill at that scale.

Bethlehem actually finished the plant, and by '74 they were having the most profitable year ever. That's when they hired me, and they've been going downhill ever since they hired me. But since then, no integrated steel plant anywhere in the world has ever been built by a company. There have been plenty of them built, but only by countries. They have been built by the backing of an entire nation. POSCO Steel, which became the largest steel company in the world in the late '90s, was built by the Korean government. That's where the financial backing came from. It's a political thing to make that big an investment.

Government-funded; passed US Steel as world's largest in the 1990s. Tom's example that since Burns Harbor (1964) no major mill has been built without government financing.

When I said Bethlehem Steel was the last company in the world 50 years ago to build a steel plant, that's correct. Since then we've built plenty of steel plants in the world, but it was always a country that financed it. POSCO Steel in the 1990s became the world's largest steel company, passing US Steel as the world's largest steel producer, but they were funded by the government of South Korea. The world's largest steel company today is Bao Steel in China, funded by the Chinese government. Now, you can say ArcelorMittal is a huge steel company, but they haven't built any new plants that I know of. They go out and buy these other plants at ten cents on the dollar when the great managers run them into the ground.

World's largest steel company; 30 million tons/yr at one site (3% of world production) from ~5 blast furnaces; positioned near Korean shipyards. Used as the modern scale benchmark for blast furnace metallurgy.

In a big modern Japanese or Korean mill — 5,000 cubic meters, 10,000 tons a day, maybe 15,000 tons a day. One of these can produce four to five million tons of steel a year. That's half a percent of the world total out of one blast furnace. POSCO, the world's largest steel company, produces 30 million tons at one site — three percent of the world's production at one steel mill. Much of it goes into Korean shipbuilding, which is maybe ten or fifteen miles away. They may have five blast furnaces producing 25 million tons of steel a year. It only takes five of them.

Counterexample showing that greenfield integrated steel mills can be built — but only when bankrolled by a nation, not by shareholders. Korean government investment, 1970s.

Let me finish that story. We've had new steel mills built since 1965. POSCO, the world's largest steel company, in Pohang, Korea, built a steel mill in the 1970s. But POSCO Steel was not bankrolled by financial people — it was bankrolled by the Korean government. There have been probably a dozen steel mills built in the world since 1965 on greenfield sites, but not a single one has been built by a company that was risking shareholder money. It was countries who built a steel mill because they saw steel as vital to the growth of their nation.

Korea's 1978 government-directed creation of POSCO; Colonel Park's overnight transformation into industrial leader; POSCO's later position as world's largest steel company.

I used to be the POSCO professor in the 1990s. In 1978 the premier of Korea — Park — went to Colonel Park, who was his chief of staff, and said, we want to build a steel mill in Korea so we can be rich like the Japanese. Colonel Park became, overnight, from being a military attache, head of this new steel company in Korea. By the time I went over there as the POSCO professor to give a talk, it was the world's largest steel company. They basically hooked up with US Steel, who sold them the technology, and built the world's largest steel company in Pohang, Korea — that's why it's POSCO. Except it's not the world's largest anymore. Anybody know the world's largest steel company today? It's Baosteel. It's Chinese. They make twice as much steel as the entire United States. And we were the big guys. After World War Two we made seventy-five percent of the world's steel. Anyone figure out why? Because we bombed out the competition. A world war is a wonderful thing for rising to the top if they're not dropping bombs on your country.

Tom was the POSCO professor; lectured there in 1999. Korean government financed the mill; bought the technology from U.S. Steel. POSCO surpassed U.S. Steel. Example of post-1965 integrated steel mills being national, not corporate, projects.

Same thing for Intel — what does it cost to build a silicon fab? 15 or 20 billion dollars. What does it cost Boeing to design a new aircraft? 15 or 20 billion dollars. What does it cost Pratt & Whitney or General Electric to develop a new jet engine? 10 or 15 billion. These are bet-your-company investments. Very few companies in the world can, or are willing to, do that. All the new steel mills since 1965 — there have not been a lot of integrated steel mills built, but they were built by countries, not by companies. The Koreans built — POSCO became the world's largest steel company. I was the POSCO professor; I went over there in 1999, had to give lectures to them about the steel industry. They had surpassed U.S. Steel. U.S. Steel sold them the technology, they built it. But it was the Korean government that was financing it. Who's the largest steel company in the world today? Bao Steel, the Chinese. Again, who finances that? The Chinese government. Lakshmi Mittal, I think, is number two. But Lakshmi Mittal is a conglomerate of like 15 of the companies that existed in 1970. Lakshmi Mittal was smart enough to go around and buy them up. I don't know who gave him the money, but he went around and bought them up, and he's a rich man because of it.

Korean president's colonel Park sent to start a steel company; U.S. Steel sold the technology; POSCO became the world's largest by 1997. Tom held the POSCO Professorship at MIT in the 1990s. Used to make the case that since 1964, every new integrated mill in the world has been government-built (POSCO, Saudi gas-reduction, China).

Take the Koreans. In the 1990s, I was the POSCO Professor. POSCO was the Korean steel company. The president of Korea took one of his colonels and said, "Mr. Park, I want you to go and start a steel company." Park went and talked to U.S. Steel. U.S. Steel sold them the technology, and they built POSCO Steel in Korea, which by 1997 was the world's largest steel company. From the early 1970s, in twenty-five years they became the largest steel company in the world, until the Chinese passed them by a long shot. But that was at the backing of the government of Korea to build what was, at that time, probably a ten- or fifteen-billion-dollar plant. They built a couple of them in Korea — Korea doesn't need but a couple. Saudi Arabia's got lots of natural gas, so what do they do with their natural gas? They build a gas reduction facility. They don't use blast furnaces — they use all the natural gas that they can't get out of the country any other economical way, they import iron ore, and they make steel. Because steel is fundamental to a growing economy. That's what the Japanese did after World War Two — they built steel companies and then they built shipyards, they became the largest shipbuilder in the world. Other people have passed them by, but people are all using that model.

1972 Korean state-funded steel mill built with U.S. Steel engineering, led by Colonel Park under President Park. By the late 1990s POSCO surpassed Nippon Steel as world's largest. Tom held the POSCO professorship.

In the meantime the Japanese had enough profitability they were building brand new steel mills. The Koreans decided to build a steel mill — actually it was the premier of Korea who said, if we're going to be a major shipbuilding country — this is the early 1970s, I think 1972 — they needed to produce steel, they couldn't just always buy it from the Japanese. Koreans hate the Japanese — they were slaves to the Japanese all through the 1930s, so there's not exactly a lot of love lost there. The Koreans partnered with U.S. Steel. U.S. Steel gave them the engineering. They built a company with the government of Korea. The guy put in charge of it was Colonel Park, who worked for President Park, who was the premier of Korea. Colonel Park built POSCO Steel. I used to be the POSCO professor, because in the late 90s, 25 years later, POSCO Steel became the world's largest steel company, larger than Nippon Steel.