PlanMaestro Posted June 7, 2013 Share Posted June 7, 2013 http://www.beyondproxy.com/investing-in-korea/ http://www.scribd.com/doc/140147582/Young-Lee-ValueInvestingCongress-050613 Link to comment Share on other sites More sharing options...
MrB Posted June 10, 2013 Share Posted June 10, 2013 Case Study of POSCO - Analysis of its Growth Strategy and Key Success Factors http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1505288 Link to comment Share on other sites More sharing options...
MrB Posted June 10, 2013 Share Posted June 10, 2013 Global Steel industry report https://webforms.ey.com/Publication/vwLUAssets/Global-Steel-Report-2013/$FILE/Global-Steel-Report-2013_ER0046.pdf POSCO’s 4th Year being “The World’s Most Competitive Steelmaker” by WSD http://globalblog.posco.com/783 Low cost is key as prices unlikely to recover soon http://www.metaljunction.com/news/newsdetail/low_cost_is_key_as_prices_unli#sthash.olsSPvic.ECVxtuaK.dpbs Steel Industry in India-2013 http://www.cptgl.com/steel-industry-in-india-2013-report.pdf Link to comment Share on other sites More sharing options...
alwaysinvert Posted June 20, 2013 Share Posted June 20, 2013 Cheaper and cheaper. Link to comment Share on other sites More sharing options...
PlanMaestro Posted June 20, 2013 Share Posted June 20, 2013 Cheaper and cheaper. While Bass worries about Japan, China can get really interesting. Emerging markets getting hit, Mexican Peso and Brazilian Real spiking too. http://www.businessinsider.com/china-1-week-shibor-surges-2013-6 Link to comment Share on other sites More sharing options...
PlanMaestro Posted June 21, 2013 Share Posted June 21, 2013 Steel production costs cut by shale gas (direct reduced iron) http://www.ft.com/intl/cms/s/0/ff3e493e-d82d-11e2-9495-00144feab7de.html#axzz2WUfQdgBQ Big Steel has become a very big problem for China Wisco is a large part of an ailing, inefficient industry that Beijing appears unable to discipline http://www.ft.com/cms/s/0/fa98c4e2-d830-11e2-9495-00144feab7de.html#ixzz2Wo83KkMF Link to comment Share on other sites More sharing options...
txlaw Posted June 21, 2013 Share Posted June 21, 2013 So can anyone give me a general sense of the market in steel right now? Are we in conditions that would be considered a "glut" of steel (edit) to the same extent we saw a glut in nat gas in NA? And have we hit a level where the hypothetical average steel company is just breaking even -- or even losing money? Finally, can someone explain to me in simple terms why POSCO is more than just a low-cost producer in a commodity biz, but instead is a "high-tech" biz? Munger has said something to this effect, but I don't really get the thesis here. Link to comment Share on other sites More sharing options...
Shane Posted June 21, 2013 Share Posted June 21, 2013 His basic point was their technology gave them a low cost advantage, so in order to maintain the advantage they had to continually have that edge. This is opposed to USG which has a location and logistics advantage (or so I have read). Link to comment Share on other sites More sharing options...
PlanMaestro Posted June 22, 2013 Share Posted June 22, 2013 China http://ftalphaville.ft.com/2012/08/30/1126061/the-ever-increasing-hunger-for-steel/ http://ftalphaville.ft.com/2012/06/14/1020101/how-china-can-keep-urbanising-with-flat-steel-demand/ Iron Ore http://ftalphaville.ft.com//2012/07/31/1101731/about-that-120-iron-ore-floor/ http://ftalphaville.ft.com/2013/01/15/1335952/iron-awe/ http://ftalphaville.ft.com/2013/03/20/1430812/the-best-laid-plans-of-miners-and-men/ Link to comment Share on other sites More sharing options...
alwaysinvert Posted June 22, 2013 Share Posted June 22, 2013 His basic point was their technology gave them a low cost advantage, so in order to maintain the advantage they had to continually have that edge. This is opposed to USG which has a location and logistics advantage (or so I have read). I think Posco has a bit of both. At least their locations/logistics of the giant mills in South Korea is a massive advantage. Sure, someone could in theory build new areas of ports to try and dislodge Posco. But is it going to happen? They will have to match lead times etc as well. And is there even any space for it? The Posco mills have had their places for quite a while Korea, while the cities have exploded around them. That's another huge cost, and you just cannot cram in new steel mills anywhere where there's enough physical space, so the theoretically possible new mills would probably have a distinct geographical disadvantage. So can anyone give me a general sense of the market in steel right now? Are we in conditions that would be considered a "glut" of steel (edit) to the same extent we saw a glut in nat gas in NA? Severe overcapacity and severe underutilization of mills. If this keeps going for a bit longer, there will be quite a lot of companies that will have to take in more money, sell off even more assets or restructure. Especially the European manufacturers are hurting badly. The good thing about high-fixed cost businesses is that the high-cost manufacturers can't take that much of a bad market, especially when they have to lever up to even have a chance of decent returns. And the downgrades will just be self-reinforcing for the sitting ducks in the business. I don't know squat about natural gas so I'm afraid I can't make a comparison. And have we hit a level where the hypothetical average steel company is just breaking even -- or even losing money? Yep, very much seems so, but there's a geographical divide. Finally, can someone explain to me in simple terms why POSCO is more than just a low-cost producer in a commodity biz, but instead is a "high-tech" biz? Munger has said something to this effect, but I don't really get the thesis here. I'm certainly no steel expert, but I like what I see with their cost structure - they seem nimble by comparison. Check lead time. Finex is not used to a great extent (yet, at least) but it reduces input costs in the manufacturing process. I don't know enough about the actual processes of steel making to make a judgement, but I've seen several people making statements to the effect that they and Nippon Steel are the technical innovators in the business. On competitiveness, Posco consistently rank in the top in industry reports. I know these are only indications and not actual explanations, but for me it seems to be as far as I can get down this line. My thesis on Posco is pretty simple - the steel market is in a perfect storm with extremely high iron ore prices (big money going into more mining) and low steel prices (not much new capacity being built). Something's gotta give, and some companies are very levered and making big losses while demand WILL continue to grow (albeit maybe not by as much as before). In that environment Posco looks like the safest bet at a very cheap price tag. It's highly unlikely that it will give the highest payoff a few years out if the market turns relatively quickly, but I think the risk of losing my shirt is minimal, barring horrible capital allocation decisions. Link to comment Share on other sites More sharing options...
txlaw Posted June 22, 2013 Share Posted June 22, 2013 Thanks for the responses -- both public and private -- folks. Link to comment Share on other sites More sharing options...
ASTA Posted June 25, 2013 Share Posted June 25, 2013 I said that I might join the Swedish mafia and I did yesterday. Thanks for all the information. Link to comment Share on other sites More sharing options...
Kiltacular Posted June 26, 2013 Share Posted June 26, 2013 Update on Krakatau joint venture http://www.steeltimesint.com/news/view/krakatau-posco-jv-nears-completion-of-3bn-mill -- Update on India http://www.financialexpress.com/news/posco-land-acquisition-set-to-be-over-by-mou-s-8th-anniversary/1132150/1 -- Posco named world's most competitive steel maker 4th year in a row http://www.4-traders.com/POSCO-6494927/news/POSCO-World%60s-Most-Competitive-Steelmaker-for-4-consecutive-years-17039354/ -- Reducing input costs by $10 billion KRW (about $10 million U.S.) Link to comment Share on other sites More sharing options...
meiroy Posted June 27, 2013 Share Posted June 27, 2013 Thanks for all the posts, I started to look at ithis now. A few thoughts which are probably not worth much: 1. Common value trap argument: it's at 100 now (capacity, production etc.) if this and that will happen it will add 20, thus it will be 100 + 20 = 120 i.e. much better than now. The trap is that there is an assumption the 100 is sustainable. The 100 might drop to 50 thus 50 +20 = 70. Read: China. 2. Buffet got in cheaper, didn't he? He can also wait for 10 years. 3. Couldn't cheaper energy in the USA make local steel producers more competitive? China also has massive shale reserves. 4. Does their low cost gives them such a safety margin where they are still competitive considering transportation cost if China or other locations increase their own production or take protective measures due to weakening economy? 5. Their technology is patented? Can it be copied? 6. Even if they are the lowest cost and can maintain that etc. if the global demand in fact decreases for the next few years, isn't it a falling knife? Link to comment Share on other sites More sharing options...
alwaysinvert Posted June 27, 2013 Share Posted June 27, 2013 Thanks for all the posts, I started to look at ithis now. A few thoughts which are probably not worth much: 1. Common value trap argument: it's at 100 now (capacity, production etc.) if this and that will happen it will add 20, thus it will be 100 + 20 = 120 i.e. much better than now. The trap is that there is an assumption the 100 is sustainable. The 100 might drop to 50 thus 50 +20 = 70. Read: China. 2. Buffet got in cheaper, didn't he? He can also wait for 10 years. 3. Couldn't cheaper energy in the USA make local steel producers more competitive? China also has massive shale reserves. 4. Does their low cost gives them such a safety margin where they are still competitive considering transportation cost if China or other locations increase their own production or take protective measures due to weakening economy? 5. Their technology is patented? Can it be copied? 6. Even if they are the lowest cost and can maintain that etc. if the global demand in fact decreases for the next few years, isn't it a falling knife? I don't want to take on the role of 'expert', since I certainly don't feel like one. But no one else has answered yet, so I'll give it a try. 1. Well, that's what's on everyone's mind now. It's the risk you get paid to take on, as far as I'm concerned. I have no special insights in China and to my mind hardly any one else seems to have it either. And I don't really what the impact on Posco will be if the infrastructure bubble stories turn out to be completely true. Posco haven't got that much of a direct exposure to China. Far more important is the Korean auto industry and other areas, for example. But I have no good guess on what the sustainable rate of steel consumption is compared to today. The only thing I'm fairly certain of is that it will most probably be greater 20 or 30 years out than it is today. And over time it will probably be somewhat greater growth in consumption than in population growth, due to urbanization. What impact a crash in China will have on on one hand steel prices and on the other hand iron ore prices, is not something I feel qualified to guess on. What I do believe is that Posco will be the least hurt if capacity utilization will keep being weak - as evidenced by the last few years. The longer the bear market in steel keeps going, the stronger Posco's relative position will be. But obviously, that doesn't translate one for one to gains for the shareholders. I don't, however, think that India's and southeast Asia's consumption growth trajectory will be all that impacted if China's steel consumption comes to a halt. 2. Why can't we too wait for 10 years so long as the return is adequate? He did get in cheaper and when earnings were growing at an amazingly steady rate. But check out how much Posco has grown since he invested. In 2009 he added at levels not too far off today's but revenue has grown from 40 trillion to 60 trillion and huge investments in more growth have been made (among them the Indonesia mill) which have not started paying off yet. http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pkx-posco/msg111267/#msg111267 3. Maybe, I have nothing intelligent to add here. 4. I don't know. Probably not. It would be pretty useless protectionism if it would still allow foreign companies to outcompete domestic industries, wouldn't it? 5. Finex is patented, but not widely used yet. As for other technological efficiences that reduce input costs or otherwise make the production leaner, that is pretty hard to copy with legacy technology still in place (like old blast furnaces), otherwise everyone would do it in quick order. 6. Yes, obviously. But how are you going to outguess everyone else when it comes to this? Read their reports, check the numbers. Come back and make a guess as to if it's reasonable to assume that normalized earnings are higher, the same or lower than today's. Link to comment Share on other sites More sharing options...
PlanMaestro Posted June 27, 2013 Share Posted June 27, 2013 Japan reforms rattle U.S. steelmakers http://uk.news.yahoo.com/japan-reforms-rattle-u-steelmakers-suppliers-could-gain-150050010.html#7NF4EZQ Link to comment Share on other sites More sharing options...
alwaysinvert Posted June 28, 2013 Share Posted June 28, 2013 Case Study of POSCO - Analysis of its Growth Strategy and Key Success Factors http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1505288 Some interesting stuff in there. Park spent most of his time working together with POSCO employees at the construction site, which enabled the company to complete construction of Pohang Works Phase 1, 2, 3 and 4 in a very short span of time. Even on thanksgiving holidays, Chairman Park was on the site and made decisions right on the spot if any problems occurred. When the construction of Phase 1 was delayed for three months, the company came up with emergency plans and completed the project one month ahead of schedule by working 24 hours a day. POSCO’s labor-management relations is considered to be quite amicable compared to other large manufacturing companies in Korea. In 1987, a union was organized within POSCO. However, it was soon dissolved, and currently, POSCO runs the Management Consultation Committee that stresses mutual cooperation between labor and management. The company is well-known in Korea for its advanced employee welfare system. Massive investment in employee education and training helped employees enhance their capabilities and build loyalty for their company. In particular, POSCO plants are much more efficient than steel mills in other countries in that they arrange the entire production process in one building rather than segmenting the process into separate buildings. Furthermore, the concept of functional connection was already conceived from the design stage of the four Pohang plants, which optimized the entire steel manufacturing process from transportation of raw materials to steel production. The distance between the blast furnace and the pier from which raw materials are transported was reduced, and Plant 2 and 3 were set up to be closely connected and functionally compatible with Plant 1. Furthermore, its location next to a port capable of handling 100,000 tons of steel freight was instrumental in reducing the logistics costs in comparison with locations of other steel makers situated inland. A shortened steel mill construction period helped save direct costs such as wages and indirect costs. At the same time, this leads to production ahead of schedule, which in turn reduces the cost of production. While setting up the plants of Pohang Works, POSCO completed 23 facilities out of 26 in total ahead of schedule by as long as over eleven months. POSCO’s construction cost was about $400 per ton, which was significantly lower than $1,750 in Brazil, $820 in the U.S., $700 in Europe, and $590 in Japan. Furthermore, competition is heating up in the domestic market with the entry of Hyundai Steel. By 2010, when Hyundai Steel’s integrated steel mill is completed, demand for steel from POSCO’s major customers such as Hyundai/Kia Motors, Hyundai Heavy Industries, and Hyundai Construction will most likely decrease. Link to comment Share on other sites More sharing options...
PlanMaestro Posted July 2, 2013 Share Posted July 2, 2013 Abe shakes up business torpor to invest at home http://www.ft.com/intl/cms/s/0/7093aa88-e225-11e2-87ec-00144feabdc0.html#axzz2XkNi6zgp Shinichi Okada suddenly feels brighter about the state of the world. The big fall in the yen since the end of last year has made JFE Holdings, Japan’s second largest steelmaker, a more formidable challenger to the likes of Posco of Korea and China’s Baosteel, says the board member in charge of planning and finance. The decision by Shinzo Abe, Japan’s prime minister, to join discussions on the Trans-Pacific Partnership, a free-trade bloc, is good news, too. Link to comment Share on other sites More sharing options...
meiroy Posted July 2, 2013 Share Posted July 2, 2013 alwaysinvert, thank you for taking the time to reply. Link to comment Share on other sites More sharing options...
alwaysinvert Posted July 2, 2013 Share Posted July 2, 2013 In 12 months Posco will have added almost 13 million tons a year in capacity. Production in 2012 approached 40 million tons and will by the company's estimate decrease to 37 million in 2013. Link to comment Share on other sites More sharing options...
Kiltacular Posted July 2, 2013 Share Posted July 2, 2013 Almost, almost, almost there in India: http://www.business-standard.com/article/companies/posco-land-acquisition-halts-amid-protest-113070100995_1.html Link to comment Share on other sites More sharing options...
Kiltacular Posted July 4, 2013 Share Posted July 4, 2013 "Anti-Posco villagers retract steps, hand over betel vines to officials" http://www.business-standard.com/article/companies/anti-posco-villagers-retract-steps-hand-over-betel-vines-to-officials-113070300930_1.html -- Link to comment Share on other sites More sharing options...
alwaysinvert Posted July 9, 2013 Share Posted July 9, 2013 http://www.economist.com/news/business/21580458-worlds-overcapacity-steelmaking-getting-worse-and-profits-are-evaporating-inferno Link to comment Share on other sites More sharing options...
PlanMaestro Posted July 9, 2013 Share Posted July 9, 2013 http://www.economist.com/news/business/21580458-worlds-overcapacity-steelmaking-getting-worse-and-profits-are-evaporating-inferno Nice chart too, thanks. http://farm6.staticflickr.com/5337/9251940622_e2d55a8198_o.png Link to comment Share on other sites More sharing options...
plato1976 Posted July 9, 2013 Share Posted July 9, 2013 I put this on my watchlist But frankly what's happening in China really really scared me I won't touch these things until 1) they show negtive earning 2) China financial system has a major shake 3) or, suddenly for whatever reason I don't know, this one suddenly drops to a ridiculous valuation. Now it's cheap, but not ridiculously cheap even if this is a very well organized low cost steel producer...... http://www.economist.com/news/business/21580458-worlds-overcapacity-steelmaking-getting-worse-and-profits-are-evaporating-inferno Nice chart too, thanks. http://farm6.staticflickr.com/5337/9251940622_e2d55a8198_o.png Link to comment Share on other sites More sharing options...
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