POSCO’s voluntary production cut with a proposed shutdown of its longest-operating blast furnace in Korea is expected to be backed by the country’s “one-shot” law designed to help companies in ailing sectors eliminate excess capacity and streamline productivity.

The steelmaker had extended the life of the furnace after it was first ignited in 1973. The symbolic furnace of the history of Korea’s steelmaking became mothballed due to a supply glut from China. It now awaits a final go-ahead for demolition due early next year.

The industry ministry said on Monday it will actively support the steelmaker’s decision to close the outdated furnace with regulatory relief and tax breaks based on the legislation aimed at revitalizing the country’s steelmaking, shipbuilding and other key industries suffering from oversupply.

“The government will actively help POSCO with the Corporate Vitality Enhancement Act,” said Doh Kyung-hwan, head of the Industrial Infrastructure Office at the Ministry of Trade, Industry and Energy, adding, “the steelmaker’s decision to streamline its furnace assets and build a smart steel mill is a desired decision.”

POSCO internally decided to retire the blast furnace despite its symbolic importance as the country’s first blast furnace due to aging and the government’s recommendation for self-restructuring. To make up for a production cut, the steelmaker will expand production capacity of its third blast furnace instead of building a new one. Two other big steel makers Hyundai Steel and Dongkuk Steel are already eligible for the government’s support based on the law regarding the former’s divestiture of forging facilities and the latter’s thick plate mill sale.

The law which went into effect on Aug. 13 last year has benefited 15 enterprises.

By Ko Jae-man

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]