Posco, Nippon Steel to up stakes mutually

SEOUL: South Korea’s Posco and Japan’s Nippon Steel have agreed to expand capital and business ties as the global steel industry faces challenges from consolidation and rapidly growing Chinese producers. Posco said Japan’s Nippon Steel will increase its holdings in the South Korean steel maker by 2% for 445.1bn won ($464.6m). Posco will buy a 1.64% stake, or 111.6m shares, in the Japanese steel maker for the same amount.

Nippon Steel, the world’s third-biggest steel maker, currently owns a 3.32% stake in Posco, ranked No 5, while Posco holds 2.17% of Nippon Steel. “The two firms have decided to expand their strategic alliance for a better position in the global steel industry,” Posco said in a filing with South Korean regulators.

The companies also agreed to supply each other with steel slabs. The move comes amid expectations that Posco, highly profitable and with a fragmented ownership structure, would take measures to head off potential hostile takeover bids as the global steel sector consolidates.

In a separate filing, Posco said it plans to build a $361m plant in Vietnam for the production of cold-rolled steel.
The plant, which is scheduled to start operating in late ’09, will have an annual output capacity of 700,000 tonne.