Creating Future Beyond Steel

Ohjoon Kwon Chief Technology Officer, POSCO

[4. 25, 2012]

POSCO at a Glance

• Brief History of POSCO

• Financial accomplishments

• Most competitive steelmaker

• Proudly rated as a noteworthy company

• POSCO and its affiliates

• Vision 2020

1

Brief history of POSCO

Founded in 1968 as a national enterprise of Korea

Growth driven by the slogan of 『Resources are limited, Creativity is unlimited』

(Million ton)

30

20

10

’68

Privatized

Completion of Gwangyang Steelwork (20.8)

Listed in NYSE

’88

Completion of Pohang Steelwork (9.1)

Operation of 1st Furnace

’73 Founded

’83 IPO

’92

’94

’00

’07

’11

Crude Steel Production of 37.6 M ton Developmen

t of the FINEX Process

2

Time

CAGR 14.5%

Crude Steel Production

Financial accomplishments

Continuous sales growth since its foundation

Two-digit profitability despite several economic shocks

3

(Trillion KRW)

0

1972

Sales

10

20

30

1980 1990 2000 2010

40

Profit

CAGR 30.3%

Annual Sales

39.2

4.3

Average operational profit : 18.2% (2000-2011)

The 6th biggest steel-making company in the world

Steel Production by Company

Source : Steel Business Brief(2010)

(Million ton)

4 Most competitive steelmaker

Ranked 1st by WSD(World Steel Dynamics) for 2 consecutive years

Competitiveness Score

Source: WSD(2010)

0

2

4

6

8

10 Market Dominance

Technology Innovation

Bargaining Power

Productivity

Skilled Labor

Financial Structure

POSCO

Average

35.4

90.6

Arcelor Mittal

POSCO

Named as a sustainable company by Dow Jones for recent 6 years

5 Proudly rated as a noteworthy company

Most admired steel company by Fortune magazine in 2010

No.1

in metal industry

Named for

2006~2010

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Subsidiaries in the field of E&C, Energy, ICT, Chemistry, etc.

Consolidated sales 68,939 billion(KRW) in 2011 including 7 listed affiliates

6 POSCO and its affiliates

38,461

2008 2009 2010

ST

EE

L

Consolidated Sales (Bn KRW)

ST

EE

L S

UP

PO

RT

(i

nclu

din

g m

ate

ria

ls)

15,672

6,366

882

830

EN

ER

GY

E&

C

ICT

7

Core (120T) : Target the world top-tier steelmaker

Growth (60T) : Exploit capabilities of existing subsidiaries

Seed (20T) : Capture future opportunities

Vision 2020 : 2001) trillion KRW by 2020

2012 2020

60T • E&C, ICT • Energy, Chemistry

Core

Growth

Seed

120T • Steel • Raw Materials • New Materials • Steel Supporting

20T • New biz(green)/Ocean

1)≒ 180 Bn USD

Challenges and Our Approach

• Slowdown of organic growth from steel biz

• Megatrends and paradigm shift

• New growth initiatives

• Ambidextrous strategy

• Technology synergies with steel business

8

0

250

500

750

1,000

1,250 1,122

Impending saturation of the Korean national steel market

Desperate to search for new (non-steel) growth engine

Source: Steel Statistics Yearbook 2011

(Kg per person)

9 Slowdown of organic growth from steel biz

Steel Consumption by Country (’10)

Advent of green & smart society initiated by socio-economic forces

Collapse of the conventional industry boundary and market rules

10 Megatrends and Paradigm Shift

Climate Change

Smart Urbanization

Resources Shock

Evolution through Chaotic Convergence

Borderless Innovation

Rise of Green Economy

[Global Megatrends]

Overseas steel projects in the emerging countries

Three growth themes corresponding to global megatrend

Steel

[Growth Themes]

[Items] Green Materials

11 New growth initiatives

Rare Earth

Waste heat Bio Power Storage Smart Grid

Lithium

Fe-Ni

Magnesium

Amorphus

Fuel Cell

BTX SNG

Wind

Cathode / Anode CFRP

Green Energy

Resource Application

Fe Powder

Inside-Out : Leverage the capabilities of POSCO and affiliates

Outside-In : Move forward to preempt future opportunities

Develop unique in-house technologies

RIST POSTECH

[Current]

Strategy Ⅱ

Strategy Ⅲ

Preempt promising future businesses

[Future]

Expand capabilities of affiliates

12 The ambidextrous strategy

Strategy Ⅰ

Terminal M-tech

P&S

Rich experience in handling various materials

High volume energy consumption

Coal handling

technology Liquid metal utilization technology

Smelting reduction process technology

Strip casting technology

By-product utilization technology

13 Technology synergy with existing steel biz

Innovative Success Stories

• Materials

- Lithium

- Nickel

- Magnesium

- Carbon and Coal Chemistry

• Energy

- Fuel Cell: SOFC

- Coal Utilization

14

12~36 month

25~40%

99.2%

K,B

8 hours

>80%

99.99%

Mg, Ca, Na, K, B

Core material of the secondary battery (cathode)

Dramatic reduction of processing time through POSCO’s unique tech.

Non Evaporation

Method Lithium Carbonate

(Li2CO3)

Other Minerals

Brine (Li, Na, K, B, Mg, Ca, Cl)

Mg, B, K

15 Lithium

[Processing time]

[Recovery rate]

[Purity]

[By-product Utilization]

Conventional tech. POSCO unique tech.

2 hours

81%

N/A

High temperature(220℃) High pressure(40atm)

Less than 1 hour

93%

Magnetite, plaster

Room temperature Normal pressure

Core material in stainless steel and cathode of the secondary battery

Utilizing low grade resource by process innovation

16 Nickel

Hydrometallurgy

Fe-Ni Low grade Limonite

H2 Reduction (600~1000℃)

Leaching(HCl)

Cementation

[Recovery rate]

[Leaching condition]

[Processing time]

Conventional tech. POSCO unique tech.

[By-product Utilization]

100~500mm

Casting-hot rolling-warm rolling

Off line heat treatment

10~20 ㎛

4~7mm

Casting – warm rolling

In line heat treatment

5~6 ㎛

Magnesium

[Thickness]

[Process]

[Heat treatment]

[Grain Size]

Indispensible for light vehicles: lighter than Al, as strong as steel

Manufacturing cost reduction through omitting middle processes

Conventional tech. POSCO unique tech.

Coil annealing Furnace

Reversible Warm Mill

Induction Heater

Melting Furnace

Strip Caster (4~6t Coil)

17

Cokes-derived new businesses from the by-products of steelworks

Environmental friendliness along with economic values

Graphene

Steelworks

BTX

Catalyst Conversion

Carbon Business

Coal Chemistry Business

CFRP

Carbon fiber

Needle Cokes Anode

Coal tar Pitch

Secondary battery

Electrode Future Materials

Airplane Vehicle

Cyclohexane Paraxylene

Plastic Synthetic fiber

18 Carbon and Coal Chemistry

~ 35%

80 ~ 85%

Max 60℃

Watt ~ KW

> 50%

80 ~ 85%

> 300℃

Watt ~ MW

[Electricity efficiency]

[Thermal efficiency]

[Exhaust Temp.}

[Capacity]

Fuel Cell: SOFC

SOFC (Solid Oxide Fuel Cell)

Working temperature : 650~750℃

Flexible fuels : Natural gas, Syn Gas, Bio gas

No gas reforming

Conventional tech. (PEMFC) POSCO unique tech.

Suitable for distributed and large-scale power generation

Higher efficiency and bigger capacity than PEMFC*

19

* Polymer Electrolyte Membrane FC

• SNG : Synthetic Natural Gas

• DME : Dimethylether

• CTL : Coal to Liquid

• IGCC : Integrated Gas Combined Cycle

Replacing Natural gas

Syn Gas Gasification

Coal

DME

CTL

IGCC

Replacing LPG

Replacing Diesel

Replacing Coal generation

SNG

Coal Utilization

Transforming coal into new sources of clean energy

Gasification technologies using low grade coal

H2+CO

3H2+CO

2H2+CO

2H2+CO

H2+CO

20

Future is just around the corner

• Roadmap to the future

• POSCO In-house R&D system

• Global partnership is urgent

21

Leveraging the existing businesses to finance the future investment

Stepwise expansion to adjacent areas as capabilities are built-up

Ferro

Alloy (Value Base)

Non-steel

Refining (Value Expander)

Battery

material (Value Catalyst)

Business Domain

Energy Materials

22 Roadmap to the future

LNG

Generation (Value Base)

LNG

Value Chain (Value Expander)

Global Total

Energy Provider (Value Catalyst)

New &

Renewable (Value Expander)

Business Domain

Capability

Capability

Maximizing in-house R&D synergy among the three research institutions

23 POSCO in-house R&D system

RIST Research Institute of Industrial

Science & Technology

Material & Energy

Basic Research

POSTECH Pohang University of Science and Technology

Steel

POSLAB POSCO Laboratory

New materials & energy are the key to a smart & safe future society

Global cooperation is needed to accelerate commercial success

24 Global partnership

Environmental Pollution

Energy Crisis

Resource Depletion

Aging Society

Water Shortage

Quality of life

We welcome any suggestions for open innovation worldwide

Thank you!