Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

South Korean steelmaker Posco has decided to scale down its production for the first time in 12 years. The decision comes in the wake of a steep decline in finished steel demand on the back of COVID-19. The pandemic has disrupted economic activities on a global level also impacting Korean steelmakers’ profitability.  Demand from sectors like automobile and shipbuilding has plummeted.


Posco plans to lower production by 30pc or 980,000mt in May at its plants in Pohang and Gwangyang, according to the South Korean media. These plants majorly produce cold- and hot-rolled steel sheets to be supplied in the automobile sector. Production at Pohang and Gwangyang will be lowered by 180,000mt and 800,000mt, respectively.


The steelmaker is also likely to extend the maintenance period for its Gwangyang blast furnace #3 till August or September from the previously scheduled May end.

In South Korea, automobile production declined by 15pc to 813,000 units during the first quarter of 2020, from the prior-year quarter. According to an estimate by the automobile association, production can drop by 20pc in the second quarter to 856,000 units.

Catering to the declined demand, Posco has decided to lower its production over shutting blast furnaces. An idled blast furnace usually takes time to heat up which can delay ramping up when demand picks up.


In 2008, the company had reduced production by 570,000mt for over two months amid sharp inventory accumulation and a slump in manufacturing activity. The steelmaker has also suspended its ferrous scrap purchases from both overseas and domestic markets with inventories piled up. 

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