It is reported that a recent surge in the price of iron ore has put pressure on local steelmakers, struggling with the increased costs.

POSCO recently raised prices of its products by around 20%, but in the longer term the company plans to increase its efforts to acquire its own sources of raw materials. It recently announced it would invest USD 5 billion in overseas mines this year, joining rival steelmakers in hunting for the resource.

Mr Kim Dong wan, a spokesman at POSCO, said that "We intend to procure 50% of the iron ore we use on our own by 2013, from the current 20%."

On April 15th 2010, POSCO said that it would place a preliminary bid for a major stake in Zaporizhstal of Ukraine, a steelmaker that also owns iron ore mines with an annual production capacity of 4 million tonnes. POSCO now partly owns over 20 mines overseas, including four iron ore mines.

Mr Lee Chang mok, an analyst at Woori Investment & Securities Co, said that "This is the best way for POSCO to boost its self sufficiency in iron ore in order to deal with the rising price of the material."

POSCO recently signed a deal with Vale SA of Brazil agreeing to a higher purchase price for iron ore USD 100 to USD 105 per tonne during the second quarter of the year, an increase of nearly 90% from a year earlier. The measure was a stopgap designed to keep the two companies trading while further negotiations took place.

Mr Kim Min su, an analyst at Shinhan Securities Co, said that "POSCO has no choice. It has no bargaining power. Over 66% of the iron ore supply is controlled by the big three iron mines."

POSCO also plans to reduce its overall costs by KRW 1 trillion this year to deal with rising expenditures on raw materials. Other local steelmakers are also trying to reduce costs, but are experiencing difficulty.

(Sourced from joongangdaily.joins.com)