The Australian Financial Review reported that South Korean steel giant POSCO believes it can lower the cost of making steel at Arrium and would consider producing fewer products at the diversified steel maker if it succeeds with its AUD 1 billion takeover offer.

It is understood that POSCO believes its Finex technology could dramatically transform the most uncompetitive parts of Arrium’s business.

PSOCO sees value in simplifying Arrium’s product mix, a move that analysts say could be fraught with difficulty unless it exports steel.

Credit Suisse analyst Mr Michael Slifirski said “Increasing volume of simple products and dropping complex products has always been a desire but the market is so small that they need to produce everything to get volume efficiency. Arrium’s accessible market is already too small.”

Arrium is attractive to POSCO because of its iron ore assets, which could reduce the Korean giant’s cost of making steel. Arrium is on track to become Australia’s fourth biggest listed iron ore miner, as its output volume is expected to increase to 12 million tonnes by next year. POSCO biding partner, Singapore-listed commodities trade Noble Group, is eyeing the marketing rights, currently held by BHP Billiton, for Arrium’s iron ore.


Source - The Australian Financial Review

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