In the short-term, we'll be following Hanoi's lead by setting up joint-venture processing centers, gradually expanding to include the entire steelmaking process.

In recent years, Southeast Asia has experienced skyrocketing demand for stainless steel, making it the world's second-largest market for imported cold-rolled stainless coil. We are now in the process of acquiring production facilities across the region as we aim to establish ourselves as the undisputed leader in this product category.

Collaborating Globally
Collaborative partnerships are essential to staying competitive in today's global steel market. We have technical exchanges with 10 firms including Arcelor, U.S. Steel, and Shanghai Baosteel. We have R&D partnerships with four firms including Salzgitter and Dillinger. We also hold regular meetings to discuss developments in the raw materials field with BHP Billiton and other major suppliers. Our first annual workshop with BHP Billiton in late 2003 focused on continuing supply instability in raw materials markets due to the rapid growth of the Chinese steel industry. Besides the fields mentioned above, we actively team up in other fields on a regular or ad-hoc basis as needs arise.

Since entering a strategic alliance agreement with Nippon Steel in August 2000, we have partnered in basic technology development, conducted R&D exchanges, co-invested in overseas raw materials development, and exchanged personnel. These efforts continue to pay dividends for both of our firms, enabling us to avoid unproductive competition, foster stability in the Asian steel market, and increase opportunities for collaboration. This alliance as well as our good working relationship with JFE Steel?Japan's top two steelmakers ?also ensures that we are well positioned for whatever direction industry consolidation in our neighbor market may take in the future.

Looking Beyond Steel
While steelmaking is and will remain our core business for the foreseeable future, ongoing industry restructuring and consolidation as well as rising competition from China and other global markets have made it prudent for us to explore our options for diversification beyond steel. Today, we allocate up to 5% of our annual investment budget for projects that promise opportunities for synergy with our core steel business, such as new materials and energy, as well as partnering with firms that have groundbreaking technology in entirely new fields like biotechnology as we strategically expand our business horizons. Our partnership with POSCO BioVentures Management LLC, an unrelated firm, through our POSCO America Corporation subsidiary is a case in point. Since September 2002, a venture fund we seeded has invested in promising U.S. biotech ventures, giving us a potentially lucrative stake in this growth industry as well as a valuable network for future ventures. Another strategic biobusiness partnership we have is with the Postech Biotech Center, which opened in October 2003 at Pohang University of Science and Technology. As the center grows to play a leading role in Korean biotech research, we'll play a key role in helping bring its discoveries to market as we continue to establish ourselves in this high-tech field.