Steel Industry Analysis:
POSCO vs. U.S. Steel
Sanghoon Lee, Minhyong Lee, Jaekook Han
Youngjae Chae, Alexey Morozov, Vincent Lee
While the field of material science has progressed dramatically over the past few decades with the advent of cutting edge materials (such as carbon fiber, carbon fiber nano‐tubes, 3D printing, eco‐ friendly materials, etc.) the world economy is still heavily reliant upon steel. Steel is the critical building‐block for the construction of critical infrastructure, such as new buildings, cars, and cargo ships to name a few. The steel industry is relatively simple compared to many other newer and “hotter” industries; as our team has alluded to before, the steel industry is just as relevant to the modern economy. Our team believes this simplicity within the business structure will be an advantage to us over other teams that select more complex industries such as the airline, car manufacturing, or hi‐ tech sectors. In addition to the simplicity of the industry, the growth over the past few years has been relatively more stable compared to many other industries (however during the 2008 recession the entire industry was crippled similar to many other industries). Company Rationale:
Our team decided to choose the two companies because both are and have been critically important to the global economy. POSCO (formerly Pohang Iron and Steel Company) was founded recently (in the 1960’s) but is Korea’s largest steel manufacturer and in 2013 POSCO was ranked as the 6th largest steel producer in the world1. United States Steel Corporations (also known as U.S. Steel) is arguably one of the most important corporations in American history. The company was formed in the early 20th century by the merger of Carnegie Mellon’s Carnegie Steel Company and Federal Steel Company (financed by Mr. J.P. Morgan), and was at the time one of the largest M&A deals in U.S. history. U.S. Steel has over time been critical to the growth of the U.S. economy and is still incredibly relevant today (ranked as the 13th largest steel producer in 20131. As the world’s 6th and 13th largest steel producers, our team feels that the two company’s may form the base of an intriguing company analysis. Additionally, due to the size of the companies, there is an abundance of data and existing studies that our team can leverage to strengthen our study. Finally, POSCO (due to its size) also trades as an ADR (American Depository Receipt) on the NYSE (NYSE:PKX) so when we compare the two companies, our team hopefully will not encounter many of the issues that come with comparing companies with different accounting practices.
The global steel industry is growing at a steady rate and has rebounded considerably since the recession in 2009. A big driver for this growth is China’s demand, which has pushed up steel prices. Dragging down demand has been the slow Eurozone recovery.
Millions of Metric Tons
Global Finished Steel Demand
U.S. Steel Company Background:
United States Steel Corporation (U.S. Steel) was created in 1901 and is now the largest integrated steel company in the United States and the 12th largest in the world. The annual steelmaking capability of the company is more than 27 million tons. The company has the three main segments. The largest segment is the flat products, which include hot rolled and cold rolled sheets, both of which are bought by automobile and construction ...
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