POSCO cuts steel output, Voestalpine freezes plans

By Miyoung Kim and Humeyra Pamuk

SEOUL/LONDON (Reuters) - World No. 4 steelmaker POSCO (005490.KS: Quote, Profile, Research) announced its first output cut on Thursday, and Austrian counterpart Voestalpine (VOES.VI: Quote, Profile, Research) froze 5 billion euro investment plans as inventories rise and demand tumbles.

The moves by the two companies reflects the impact the deepening global recession is having on steel-consuming industries such as the automotive and white goods sectors.

"When you look at some of the industries that POSCO served -- ship building, autos -- the only surprise was that it is only now that they have cut back," analyst Neil Buxton at industry consultants GFMS said.

POSCO, which produces around 2.75 million tonnes of crude steel a month, will reduce output by 200,000 tonnes in December and by 370,000 tonnes in January, it said in a statement. The cuts average out at around 10 percent of monthly production. [nSEO155078]

"The reduction is very small at around 2 percent of its annual output but it is symbolic and suggests that even top-tier companies are facing great difficulties," said Cho In-je, an analyst at KB Investment & Securities.

The cuts come just a week after the company said it would nearly double domestic investment to a record $4.3 billion next year to support its long-term expansion plan. [nSEO348554]

Analysts said the steelmaker might have to tighten its belt even more and cut production further into next year.

"POSCO may have to follow its rivals and increase production cuts if market conditions continue to deteriorate, but it'll seek a strategy of keeping production plans flexible due to growing market uncertainty," said Kim Hyun-tae, a Hyundai Securities analyst.