In the steelmaking field, we continued to develop key technologies to improve convertor productivity and durability. In recent years, we have improved our dynamic refractory brick repair process and slag control methods, developed a zero-downtime refractory reconstruction process, and installed an N2 splash-coating facility. These ongoing advances at the Pohang No. 2 Steelmaking Plant have produced an industry-leading convertor lifespan performance, rising from 5,967 heats in 2001 to 7,218 heats in 2003. Together, these advances enabled us to raise our 2003 crude steel output by 834,000 tons to 28,900,000 tons.

Maintaining Excellence
In 2003, the second full year since we launched our Maximo computerized maintenance management system in 2001, facility downtime fell 47.9% at Pohang and 9.9% at Gwangyang, while planning accuracy rose by 23.2% and 27%, respectively. Ongoing facility upgrades and systematic inspections extended our regular hot-rolling mill shutdown cycle from four weeks to five weeks, eliminated annual overhauls at our continuous casting plants, and steadily reduced the need for scheduled facility shutdowns. Over the next four years, we will continue to extend maintenance intervals and optimize the use of our maintenance resources as we aim to reduce maintenance costs by around KRW 500 billion annually at each of our steelworks.

Procuring Competitiveness
In 2003, we purchased a total of 73,773,000 tons of raw materials, including 41,290,000 tons of iron ore, 19,871,000 tons of coal, 1,444,000 tons of metallics, and 743,000 tons of stainless steel materials such as nickel, ferrochrome, and stainless scrap. While total materials purchased increased by 2.8% in terms of tonnage, higher international prices in virtually all major raw materials categories and logistics costs pushed expenditures up 19.5% to KRW 5,200 billion. Over the years, we have partnered with major international raw materials suppliers to develop mines and build processing facilities to secure a stable supply of materials for our operations. We have invested in coal mines in Australia and Canada since the early 1980s, and our joint ventures in Brazil and South Africa have been producing iron ore pellets and ferrochrome since 1998. In October 2003, our POSMAC iron ore mine venture with BHP Billiton in Australia officially opened, marking our debut in this key resource development field. As expanding global mill capacity in China and elsewhere, continues to tighten supply, we are aggressively moving to ensure our materials procurement needs are met through long-term contracts and larger bulk purchases. At the same time, we continue to lower costs by increasing purchases of inexpensive materials as well as sourcing from regional suppliers. We have also begun using futures markets to procure a portion of our requirements for materials such as nickel that are currently experiencing significant price volatility. Since 1983, we have retained a fleet of bulk carrier vessels to transport our raw materials. Our 37-vessel fleet currently delivers 75% of our requirements, with the remaining 25% covered through short- and long-term chartering contracts. We believe this strategy gives us the flexibility to minimize the impact of increasing volatility in the global shipping industry.