##### Table of Contents

As filed with the Securities and Exchange Commission on April 29, 2013 

 

 

 

**UNITED STATES SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

**Form 20-F**

**(Mark One)**

**OR**

**For the fiscal year ended December 31, 2012**

**OR**

**OR**

Date of event requiring this shell company report             

**For the transition period from              to            **

**Commission file number 1-13368**

**POSCO**

*(Exact name ofRegistrant as specified in its charter)*

 

**POSCO Center, 892 Daechi-4-dong, Gangnam-gu**

**Seoul, Korea 135-777**

*(Address of principal executive offices)*

**Lee, Sang Gyun**

**POSCO Center, 892 Daechi-4-dong, Gangnam-gu,**

**Seoul, Korea 135-777**

****Telephone: +82-2-3457-1085; E-mail: sg.lee@posco.com; Facsimile: +82-2-3457-1982***(Name, telephone, e-mail and/or facsimile numberand address of company contact person)*

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act. 

**None**

Securities for whichthere is a reporting obligation pursuant to Section 15(d) of the Act. 

**None**

**As of December 31, 2012, there were 77,244,244 shares of common stock, par value Won 5,000 per share, outstanding (not including9,942,391 shares of common stock held by the company as treasury shares)**

Indicate by check mark if the registrant is a well-knownseasoned issuer, as defined in Rule 405 of the Securities Act.**Yes  **x******        No  ** ̈********

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934.**    Yes  ** ̈******        No  **x********

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90days.**    Yes  **x******        No  ** ̈********

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles).**    Yes  ** ̈******        No  ** ̈********

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): 

**Large accelerated filer**x******        Accelerated filer** ̈******        Non-accelerated filer** ̈********

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.    **U.S. GAAP  ** ̈******        IFRS  **x******       Other  ** ̈********

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected tofollow.**    Item 17  ** ̈******        Item 18  ** ̈********

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).**    Yes  ** ̈******        No  **x********

 

 

 

 

Table of Contents
**TABLE OF CONTENTS**

 

GLOSSARY 
   1  
PART I 
   2  
ITEM 1.
  IDENTITY OF DIRECTORS, SENIOR MANAGERS AND ADVISERS    2    Item 1.A. Directors and Senior Management   2    Item 1.B. Advisers   2    Item 1.C. Auditors   2  
ITEM 2.
  OFFER STATISTICS AND EXPECTED TIMETABLE    2    Item 2.A. Offer Statistics   2    Item 2.B. Method and Expected Timetable   2  
ITEM 3.
  KEY INFORMATION    2    Item 3.A. Selected Financial Data   2    Item 3.B. Capitalization and Indebtedness   4    Item 3.C. Reasons for Offer and Use of Proceeds   4    Item 3.D. Risk Factors   5  
ITEM 4.
  INFORMATION ON THE COMPANY    21    Item 4.A. History and Development of the Company   21    Item 4.B. Business Overview   21    Item 4.C. Organizational Structure   41    Item 4.D. Property, Plants and Equipment   41  
ITEM 4A.
  UNRESOLVED STAFF COMMENTS    43  
ITEM 5.
  OPERATING AND FINANCIAL REVIEW AND PROSPECTS    44    Item 5.A. Operating Results   44    Item 5.B. Liquidity and Capital Resources   70    Item 5.C. Research and Development, Patents and Licenses, Etc.   73    Item 5.D. Trend Information   73    Item 5.E. Off-balance Sheet Arrangements   74    Item 5.F. Tabular Disclosure of Contractual Obligations   74    Item 5.G. Safe Harbor   74  
ITEM 6.
  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES    74    Item 6.A. Directors and Senior Management   74    Item 6.B. Compensation   77    Item 6.C. Board Practices   78    Item 6.D. Employees   79    Item 6.E. Share Ownership   80  
ITEM 7.
  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS    82    Item 7.A. Major Shareholders   82    Item 7.B. Related Party Transactions   82    Item 7.C. Interests of Experts and Counsel   82  
ITEM 8.
  FINANCIAL INFORMATION    82    Item 8A. Consolidated Statements and Other Financial Information   82    Item 8B. Significant Changes   83  
 
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ITEM 9.
  THE OFFER AND LISTING    84    Item 9.A. Offer and Listing Details   84    Item 9.B. Plan of Distribution   85    Item 9.C. Markets   85    Item 9.D. Selling Shareholders   90    Item 9.E. Dilution   90    Item 9.F. Expenses of the Issuer   90  
ITEM 10.
  ADDITIONAL INFORMATION    90    Item 10.A. Share Capital   90    Item 10.B. Memorandum and Articles of Association   90    Item 10.C. Material Contracts   95    Item 10.D. Exchange Controls   95    Item 10.E. Taxation   99    Item 10.F. Dividends and Paying Agents   104    Item 10.G. Statements by Experts   104    Item 10.H. Documents on Display   104    Item 10.I. Subsidiary Information   104  
ITEM 11.
  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    104  
ITEM 12.
  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES    107    Item 12.A. Debt Securities   107    Item 12.B. Warrants and Rights   107    Item 12.C. Other Securities   107    Item 12.D. American Depositary Shares   107  
PART II 
   108  
ITEM 13.
  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES   108  
ITEM 14.
  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS   108  
ITEM 15.
  CONTROLS AND PROCEDURES   108  
ITEM 16.
  [RESERVED]   110  
ITEM 16A.
  AUDIT COMMITTEE FINANCIAL EXPERT   110  
ITEM 16B.
  CODE OF ETHICS   110  
ITEM 16C.
  PRINCIPAL ACCOUNTANT FEES AND SERVICES   110  
ITEM 16D.
  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES   110  
ITEM 16E.
  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS   111  
ITEM 16F.
  CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT   111  
ITEM 16G.
  CORPORATE GOVERNANCE   111  
PART III 
   113  
ITEM 17.
  FINANCIAL STATEMENTS   113  
ITEM 18.
  FINANCIAL STATEMENTS   113  
ITEM 19.
  EXHIBITS   113  
 
ii 

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**GLOSSARY**

 

“ADR”
  American Depositary Receipt evidencing ADSs.
“ADR depositary”
  The Bank of New York Mellon.
“ADS”
  American Depositary Share representing one-fourth of one share of Common Stock.
“Australian Dollar” or “A$”
  The currency of the Commonwealth of Australia.
“Commercial Code”
  Commercial Code of the Republic of Korea.
“common stock”
  Common stock, par value Won 5,000 per share, of POSCO.
“deposit agreement”
  Deposit Agreement, dated as of September 26, 1994, among POSCO, the ADR Depositary and all holders and beneficial owners from time to time of ADRs issued thereunder, as amended by amendmentno. 1 thereto dated June 25, 1997.
“Dollars,” “$” or “US$”
  The currency of the United States of America.
“FSCMA”
  Financial Investment Services and Capital Markets Act of the Republic of Korea.
“Government”
  The government of the Republic of Korea.
“IASB”
  International Accounting Standards Board.
“IFRS”
  International Financial Reporting Standards.
“Yen” or “JPY”
  The currency of Japan.
“Korea”
  The Republic of Korea.
“Korean GAAP”
  Generally accepted accounting principles in the Republic of Korea.
“Gwangyang Works”
  Gwangyang Steel Works.
“We”
  POSCO and its consolidated subsidiaries.
“Pohang Works”
  Pohang Steel Works.
“POSCO Group”
  POSCO and its consolidated subsidiaries.
“Renminbi”
  The currency of the People’s Republic of China.
“Securities Act”
  The United States Securities Act of 1933, as amended.
“Securities Exchange Act”
  The United States Securities Exchange Act of 1934, as amended.
“SEC”
  The United States Securities and Exchange Commission.
“tons”
  Metric tons (1,000 kilograms), equal to 2,204.6 pounds.
“U.S. GAAP”
  Generally accepted accounting principles in the United States of America.
“Won” or“₩”
  The currency of the Republic of Korea.
Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding. 

 
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**PART I**

**Item 1.  *******Identity of Directors, Senior Managers and Advisers*********

**Item 1.A.  *******Directors and Senior Management*********

**Not applicable**

**Item 1.B.  *******Advisers*********

**Not applicable**

**Item 1.C.  *******Auditors*********

**Not applicable**

**Item 2.  *******Offer Statistics and Expected Timetable*********

**Not applicable**

**Item 2.A.  *******Offer Statistics*********

**Not applicable**

**Item 2.B.  *****Method and Expected Timetable*******

**Not applicable**

**Item 3.  *******Key Information*********

**Item 3.A.  *******Selected Financial Data*********

The selected financial data presented below should be read in conjunction with our Consolidated Financial Statements and related notes thereto and“Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. The selected financial data in Won as of December 31, 2010, 2011, and 2012 and for each of the years in the three-year period endedDecember 31, 2012 were derived from our Consolidated Financial Statements included elsewhere in this annual report. Our Consolidated Financial Statements are prepared in accordance with IFRS as issued by the IASB. 

In addition to preparing financial statements in accordance with IFRS as issued by the IASB included in this annual report, we also preparefinancial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) as adopted by the Korean Accounting Standards Board (the “KASB”), which we are required to file with the Financial ServicesCommission and the Korea Exchange under the Financial Investment Services and Capital Markets Act of Korea. English translations of such financial statements are furnished to the Securities and Exchange Commission under Form 6-K. Beginning with ourfinancial statements prepared in accordance with K-IFRS as of and for the year ended December 31, 2012, we are required to adopt certain amendments to K-IFRS No. 1001, Presentation of Financial Statements, as adopted by the KASB in 2012,pursuant to which we present operating profit or loss as an amount of revenue less cost of sales and selling and administrative expenses. In our consolidated statements of comprehensive income prepared in accordance with IFRS as issued by the IASBincluded in this annual report, such changes in presentation were not adopted. See “Item 5.a. Operating Results — Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS.” 

 
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The information set forth below is not necessarily indicative of the results of future operations andshould be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements and related notes included in this annual report. 

 
  **For the Year Ended December 31,**   **    2010    **  **    2011    **  **    2012    **  **    2012    **   **(In billions of Won and millions of Dollars, except per share data)** 
Revenue (1)
  ₩    47,887    ₩    68,939    ₩    63,604    US$    59,382  
Cost of sales (2)
  39,722    59,824    56,143    52,416   
 

 
  
 

 
  
 

 
  
 

 
 
Gross profit
  8,165    9,115    7,461    6,966  
Administrative expenses
  1,492    2,035    2,129    1,988  
Selling expenses
  1,120    1,612    1,679    1,568  
Other operating income
  223    307    448    418  
Other operating expenses
  342    367    809    755   
 

 
  
 

 
  
 

 
  
 

 
 
Operating profit
  5,434    5,408    3,292    3,073  
Share of profit (loss) of equity-accounted investees
  183    51    (23)   (21) 
Finance income
  1,739    3,190    2,897    2,705  
Finance costs
  2,088    3,867    2,798    2,612   
 

 
  
 

 
  
 

 
  
 

 
 
Profit before income tax
  5,267    4,782    3,368    3,144  
Income tax expense
  1,081    1,068    983    918   
 

 
  
 

 
  
 

 
  
 

 
 
Profit for the period
  4,186    3,714    2,386    2,227  
Total comprehensive income for the period
  4,765    2,442    1,748    1,632  
Profit (loss) for the period attributable to:
    
Owners of the controlling company
  4,106    3,648    2,462    2,298  
Non-controlling interests
  80    66    (76)   (71) 
Total comprehensive income (loss) attributable to:
    
Owners of the controlling company
  4,640    2,530    1,912    1,785  
Non-controlling interests
  126    (88)   (164)   (153) 
Basic and diluted earnings per share (3)
  53,297    47,224    31,874    29,758  
Dividends per share of common stock
  10,000    10,000    8,000   
Dividends per share of common stock (in Dollars) (4)
  US$    8.78    US$    8.67    US$    7.47   
**Selected consolidated statements of financial position data**

 
   **As of December 31,**    **2010**   **2011**   **2012**   **2012**    **(In billions of Won and millions of Dollars)** 
Working capital (5)
   ₩    9,395     ₩    13,952     ₩    11,791     US$    11,008  
Total current assets
   27,672     33,557     31,566     29,471  
Property, plant and equipment, net
   25,438     28,453     32,276     30,134  
Total non-current assets
   41,746     44,852     47,700     44,534  
Total assets
   69,418     78,409     79,266     74,004  
Short-term borrowings and current installments of long-term borrowings
   10,476     10,792     10,509     9,812  
Long-term borrowings, excluding current installments
   10,664     16,020     14,412     13,455  
Total liabilities
   30,881     37,679     36,836     34,391  
Share capital
   482     482     482     450  
Total equity
   38,537     40,730     42,429     39,613  
 
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**Selected consolidated statements of cash flows data**

 
   **For the Year Ended December 31,**    **2010**  **2011**  **2012**  **2012**    **(In billions of Won and millions of Dollars)** 
Net cash provided by operating activities
   ₩    3,582    ₩    1,692    ₩    7,319   US$ 6,833  
Net cash used in investing activities
   (6,915)   (5,517)   (6,169)   (5,759) 
Net cash provided by (used in) financing activities
       4,588    4,900    (908)   (848) 
Net increase in cash and cash equivalents
   1,248    1,078    82    77  
Cash and cash equivalents at beginning of the year
   2,273    3,521    4,599        4,294  
Cash and cash equivalents at end of the year
   3,521    4,599    4,681    4,370  
 

 
(1)Includes sales by our consolidated subsidiaries of steel products purchased by such subsidiaries from third parties, including trading companies to which we sell steel products.
 
(2)Includes purchases of steel products by our consolidated subsidiaries from third parties, including trading companies to which we sell steel products. 
 
(3)See Note 31 of Notes to Consolidated Financial Statements for method of calculation. The weighted average number of common shares outstanding used to calculate basic and dilutedearnings per share was 77,032,878 shares as of December 31, 2010, 77,251,818 shares as of December 31, 2011 and 77,244,444 shares as of December 31, 2012. 
 
(4)Translated into Dollars by applying the exchange rate at the end of the applicable year as announced by Seoul Money Brokerage Services, Ltd. 
 
(5)“Working capital” means current assets minus current liabilities. 
**EXCHANGE RATE INFORMATION**

The following table sets out information concerning the marketaverage exchange rate for the periods and dates indicated. 

 

**Period**
 **At End****of Period**  **Average Rate (1)**  **High**  **Low**   **(Per US$1.00)** 
2008
  1,257.5    1,102.6    1,509.0    934.5  
2009
  1,167.6    1,276.4    1,573.6    1,152.8  
2010
  1,138.9    1,156.3    1,261.5    1,104.0  
2011
  1,153.3    1,108.1    1,199.5    1,049.5  
2012
  1,071.1    1,126.9    1,181.8    1,071.1  
October
  1,094.1    1,106.9    1,115.4    1,094.1  
November
  1,084.7    1,087.5    1,091.7    1,083.0  
December
  1,071.1    1,077.0    1,083.7    1,071.1  
2013 (through April 26)
  1,113.9    1,093.7    1,138.9    1,055.4  
January
  1,082.7    1,065.4    1,088.0    1,055.4  
February
  1,085.4    1,086.7    1,094.2    1,077.8  
March
  1,112.1    1,102.2    1,117.5    1,081.9  
April (through April 26)
  1,113.9    1,123.2    1,138.9    1,112.5  
 

Source: SeoulMoney Brokerage Services, Ltd. 

 
(1)The average rate for each year is calculated as the average of the market average exchange rates on the last business day of each month during the relevant year (or portionthereof). The average rate for a month is calculated as the average of the market average exchange rates on each business day during the relevant month (or portion thereof). 
**Item 3.B.  *****Capitalization and Indebtedness*******

**Not applicable**

**Item 3.C.  *****Reasons for Offer and Use ofProceeds*******

**Not applicable**

 
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**Item 3.D.  *****Risk Factors*******

You should carefully consider the risks described below. 

***The global economic downturn may adversely affect our business and performance. While the rate of deterioration of the global economy slowed in the second half of 2009 and the global economy showed some signsof stabilization and improvement in recent years, there can be no assurance that such recovery will continue.***

Difficultiesaffecting the European Union and global financial sectors, adverse conditions and volatility in the European Union and worldwide credit and financial markets, fluctuations in oil and commodity prices and the general weakness of the EuropeanUnion and global economy have increased the uncertainty of global economic prospects in general and have adversely affected the global and Korean economies. The global economic downturn in recent years had a pronounced negative effect on theglobal demand for steel products and their prices in 2008 and 2009. In addition, the level of trading activities between Korea and other countries tends to fluctuate based on general conditions in the Korean and global economies. While the rate ofdeterioration of the global economy slowed in the second half of 2009 and the global economy showed some signs of stabilization and improvement in recent years, the overall prospects for the Korean and global economy in 2013 and beyond remainuncertain. 

In response to sluggish demand from our customers in industries adversely impacted by the deteriorating global economicconditions in the second half of 2008, such as the automotive and construction industries, we reduced our crude steel production and sales prices in December 2008 and the first quarter of 2009. Signs that the pace of deterioration in marketconditions had slowed began to appear in the second quarter of 2009, however, and demand from certain segments of our customer base, including the domestic automotive and construction industries, showed signs of recovery starting in the secondquarter of 2009. In response, we began to incrementally increase our crude steel production starting in April 2009 and our production level normalized in the second half of 2009. Our crude steel production decreased from 34.7 million tons in2008 to 31.1 million tons in 2009, but rebounded to 35.4 million tons in 2010, 39.1 million tons in 2011 and 39.7 million tons in 2012. Prices of our steel products gradually recovered starting in the third quarter of 2009, butour export prices fell substantially in the second half of 2011 and decreased further in 2012 due to uncertainties in the global economy caused by financial difficulties affecting European countries including Greece, Spain, Portugal and Italy. Ourdomestic sales prices remained relatively stable in the second half of 2011 but decreased in 2012. 

We believe that global demand forsteel products will remain relatively weak in 2013, and we plan to decrease our steel production to approximately 37 million tons in 2013. We may decide to further adjust our future crude steel production or our sales prices on an on-goingbasis subject to market demand for our products, the production outlook of the global steel industry and global economic conditions in general. In addition, economic downturns in the Korean and global economies could result in market conditionscharacterized by weaker demand and falling prices for export and import products and reduced trade levels. Deterioration of market conditions may result in changes in assumptions underlying the carrying value of certain assets, which in turn couldresult in impairment of such assets, including intangible assets such as goodwill. We expect fluctuation in demand for our steel products and trading services to continue to prevail at least in the near future, which may adversely affect ourbusiness, results of operations or financial condition. 

***Korea is our most important market, and our current business and futuregrowth could be materially and adversely affected if economic conditions in Korea deteriorate.***

We are incorporated in Korea, anda substantial portion of our operations and assets are located in Korea. Korea is our most important market, accounting for 52.0% of our total revenue from steel products produced and sold by us in 2012. Domestic demand for our products is affectedby the 

 
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condition of major steel consuming industries, such as construction, shipbuilding, automotive, electrical appliances and downstream steel processors, and the Korean economy in general. Inaddition, the trading operations of Daewoo International Corporation (“Daewoo International”), our consolidated subsidiary in which we hold a 60.3% interest, are affected by the general level of trade between Korea and other countries,which in turn tends to fluctuate based on general conditions in the Korean and global economies. As a result, we are subject to political, economic, legal and regulatory risks specific to Korea. 

The economic indicators in Korea in recent years have shown mixed signs, and future growth of the Korean economy is subject to many factors beyondour control, including developments in the global economy. 

Due to recent liquidity and credit concerns and volatility in the globalfinancial markets, the value of the Won relative to the Dollar and the stock prices of Korean companies have fluctuated significantly in recent years. In particular, there has been increased volatility following the downgrading byStandard & Poor’s Rating Services of the long-term sovereign credit rating of the United States to “AA+” from “AAA” in August 2011 as well as increasing financial difficulties affecting European countries includingGreece, Spain, Portugal and Italy, and the overall prospects for the Korean and global economies in 2013 and beyond remain uncertain. Any future deterioration of the Korean and global economies could adversely affect our business, results ofoperations and financial condition. 

Developments that could have an adverse impact on Korea’s economy include: 

 
 • 
difficulties in the financial sectors in Europe and elsewhere and increased sovereign default risks in select countries and the resulting adverse effects on theglobal financial markets; 

 
 • 
declines in consumer confidence and a slowdown in consumer spending; 

 
 • 
adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the Dollar,the Euro or the Yen exchange rates or revaluation of the Renminbi), interest rates, inflation rates or stock markets; 

 
 • 
continuing adverse conditions in the economies of countries and regions that are important export markets for Korea, such as the United States, Europe, Japan andChina, or in emerging market economies in Asia or elsewhere; 

 
 • 
increasing delinquencies and credit defaults by retail and small- and medium-sized enterprise borrowers; 

 
 • 
the continued emergence of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competitionin export markets or for foreign investment and the relocation of the manufacturing base from Korea to China); 

 
 • 
the economic impact of any pending or future free trade agreements; 

 
 • 
social and labor unrest; 

 
 • 
substantial decreases in the market prices of Korean real estate; 

 
 • 
a decrease in tax revenues and a substantial increase in the Government’s expenditures for fiscal stimulus measures, unemployment compensation and othereconomic and social programs that, together, would lead to an increased government budget deficit; 

 
 • 
financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;

 
 • 
loss of investor confidence arising from corporate accounting irregularities and corporate governance issues concerning certain Korean conglomerates;

 
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geo-political uncertainty and risk of further attacks by terrorist groups around the world; 

 
 • 
the occurrence of severe health epidemics in Korea and other parts of the world; 

 
 • 
deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from trade disputes ordisagreements in foreign policy; 

 
 • 
political uncertainty or increasing strife among or within political parties in Korea; 

 
 • 
hostilities or political or social tensions involving oil producing countries in the Middle East and North Africa and any material disruption in the globalsupply of oil or increase in the price of oil; 

 
 • 
the occurrence of severe earthquakes, tsunamis and other natural disasters in Korea and other parts of the world, particularly in trading partners (such as theMarch 2011 earthquake in Japan, which also resulted in the release of radioactive materials from a nuclear plant that had been damaged by the earthquake); and 

 
 • 
an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States. 

***We rely on export sales for a significant portion of our total sales. Adverse economic and financial developments in Asia in the future mayhave an adverse effect on demand for our products in Asia and increase our foreign exchange risks.***

Our export sales and overseassales to customers abroad accounted for 48.0% of our total revenue from steel products produced and sold by us in 2012. Our export sales volume to customers in Asia, including China, Japan, Indonesia, Thailand and Malaysia, accounted for 69.7% ofour total export sales revenue from steel products produced and exported by us in 2012, and we expect our sales to these countries, especially to China, to remain important in the future. Accordingly, adverse economic and financial developments inthese countries may have an adverse effect on demand for our products. Economic weakness in Asia may also adversely affect our sales to the Korean companies that export to the region, especially companies in the construction, shipbuilding,automotive, electrical appliances and downstream steel processing industries. Weaker demand in these countries, combined with addition of new steel production capacity, particularly in China, may also reduce export prices in Dollar terms of ourprincipal products. We attempt to maintain and expand our export sales to generate foreign currency receipts to cover our foreign currency purchases and debt service requirements. Consequently, any decrease in our export sales could also increaseour foreign exchange risks. 

***Depreciation of the value of the Won against the Dollar and other major foreign currencies may have amaterial adverse effect on the results of our operations and on the price of the ADSs.***

Our consolidated financial statements areprepared from our local currency denominated financial results, assets and liabilities and our subsidiaries around the world, which are then translated into Won. A substantial proportion of our consolidated financial results is accounted for incurrencies other than the Won. Accordingly, our consolidated financial results and assets and liabilities may be materially affected by changes in the exchange rates of foreign currencies. In 2012, 48.0% of our total revenue from steel productsproduced and sold by us was in overseas markets outside of Korea. To the extent that we incur costs in one currency and make sales in another, our profit margins may be affected by changes in the exchange rates between the two currencies. Since thecurrency in which sales are recorded may not be the same as the currency in which expenses are incurred, foreign exchange rate fluctuations may materially affect our results of operations. Depreciation of the Won may materially affect the results ofour operations because, among other things, it causes: 

 
 • 
an increase in the amount of Won required for us to make interest and principal payments on our foreign currency-denominated debt; 

 
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an increase in Won terms in the costs of raw materials and equipment that we purchase from overseas sources and a substantial portion of our freight costs, whichare denominated primarily in Dollars; and 

 
 • 
foreign exchange translation losses on liabilities, which lower our earnings for accounting purposes. 

Appreciation of the Won against major currencies, on the other hand, causes: 

 
 • 
our export products to be less competitive by raising our prices in Dollar, Yen and Renminbi terms; and 

 
 • 
a reduction in net sales and accounts receivables in Won from export sales, which are primarily denominated in Dollars and to a lesser extent in Yen andRenminbi.****

We strive to naturally offset our foreign exchange risk by matching foreign currency receivableswith our foreign currency payables and our overseas subsidiaries have sought to further mitigate the adverse impact of exchange rate fluctuations by conducting business transactions in the local currency of the respective market in which thetransactions occur. In particular, Daewoo International’s exposure to fluctuations in exchange rates, including the Won/Dollar exchange rate, is limited because trading transactions typically involve matched purchase and sale contracts, whichresult in limited settlement exposure, and because Daewoo International’s contracts with domestic suppliers of products for export and with domestic purchasers of imported products are generally denominated in Dollars. Although the impact ofexchange rate fluctuations is partially mitigated by such strategies, we and our subsidiaries, particularly Daewoo International and POSCO Engineering & Construction Co., Ltd. (“POSCO E&C”) also periodically enter intoderivative contracts, primarily foreign currency swaps and forward exchange contracts, to further hedge our foreign exchange risks. However, our results of operations have historically been affected by exchange rate fluctuations and there can be noassurance that such strategies will be sufficient to reduce or eliminate the adverse impact of such fluctuations in the future. Because of the larger positive effects of the appreciation of the Won (i.e., the reverse of the negative effects causedby the depreciation of the Won, as discussed above), depreciation of the Won generally has a negative impact on our results of operations. 

Fluctuations in the exchange rate between the Won and the Dollar will also affect the Dollar equivalent of the Won price of the shares of our commonstock on the KRX KOSPI Market and, as a result, will likely affect the market price of the ADSs. These fluctuations will also affect the Dollar conversion by the depositary for the ADRs of cash dividends, if any, paid in Won on shares of commonstock represented by the ADSs. 

***We are dependent on imported raw materials, and significant increases in market prices ofessential raw materials could adversely affect our margins and profits.***

We purchase substantially all of the principal rawmaterials we use from sources outside Korea, including iron ore and coal. POSCO imported approximately 51.0 million dry metric tons of iron ore and 27.4 million wet metric tons of coal in 2012. Iron ore is imported primarily fromAustralia, Brazil and South Africa. Coal is imported primarily from Australia, Canada and the United States. Although we have not experienced significant unanticipated supply disruptions in the past, supply disruptions, which could be caused bypolitical or other events in the countries from which we import these materials, could adversely affect our operations. 

In addition, weare particularly exposed to increases in the prices of coal, iron ore and nickel, which represent the largest components of our cost of goods sold. The prices of our key raw materials have fluctuated significantly in recent years. For example, theaverage market price of coal per wet metric ton (benchmark free on board price of Australian premium hard coking coal) was US$191 in 2010, US$289 in 2011 and US$209 in 2012. The average market price of iron ore per dry metric ton

 
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(free on board price of Platts Iron Ore index with iron (Fe) 62% content) was US$135 in 2010, US$160 in 2011 and US$122 in 2012. Our long-term supply contracts generally have terms of threeto ten years and provide for periodic price adjustments to the then-market prices. We typically adjust the prices on a quarterly basis and maintain approximately one month of inventory of raw materials. Such price negotiations are driven by variousfactors, including the global economic outlook, global market prices of raw materials and steel products, supply and demand outlook of raw materials and production costs of raw materials. Typically, globally influenced buyers and sellers of rawmaterials determine benchmark prices of raw materials, based on which other buyers and sellers negotiate their prices after taking into consideration the quality of raw materials and other factors. In case of iron ore, if we fail to agree on thequarterly price adjustment within a predetermined deadline, the supplier and we typically agree on the purchase price based on the price formula that reflects the spot market price as well as the quality of iron ore and transportation expense. As ofDecember 31, 2012, 217 million tons of iron ore and 27 million tons of coal remained to be purchased under long-term supply contracts. Future increases in prices of our key raw materials and our inability to pass along such increasesto our customers could adversely affect our margins and profits. Increased prices may also cause potential customers to defer purchase of steel products, which would have an adverse effect on our business, financial condition and results ofoperations. 

***We operate in the highly competitive steel, trading and constructing industries, and our failure to successfullycompete would adversely affect our market position and business.***

***Steel.*** The markets for our steel products arehighly competitive and we face intense global competition. In recent years, driven in part by strong growth in steel consumption in the developing world, particularly in China, the global steel industry has experienced renewed interest in expansionof steel production capacity. China is the largest steel producing country in the world by a significant margin, with the balance between its domestic production and demand being an important factor in the determination of global steel prices. Inaddition, the global steel industry has experienced consolidation in recent years, including through the merger of Mittal and Arcelor in 2006 that created a company with approximately 10% of global steel production capacity. Competition from globalsteel manufacturers with expanded production capacity such as ArcelorMittal S.A. and new market entrants, especially from China and India, have resulted in significant price competition and may result in declining margins and reductions in revenue.Our larger competitors may use their resources, which may be greater than ours, against us in a variety of ways, including by making additional acquisitions, investing more aggressively in product development and capacity and displacing demand forour export products. 

The increased production capacity, combined with a decrease in demand due to the recent slowdown of the globaleconomy, has resulted in production over-capacity in the global steel industry. Production over-capacity in the global steel industry may intensify if the slowdown of the global economy is prolonged or demand from developing countries that haveexperienced significant growth in the past several years does not meet the recent growth in production capacity. Production over-capacity in the global steel industry is likely to: 

 
 • 
reduce export prices in Dollar terms of our principal products, which in turn may reduce our sales prices in Korea; 

 
 • 
increase competition in the Korean market as foreign producers seek to export steel products to Korea as other markets experience a slowdown;

 
 • 
negatively affect demand for our products abroad and our ability to expand export sales; and 

 
 • 
affect our ability to increase steel production in general. 

Steel also competes with other natural and synthetic materials that may be used as steel substitutes, such as aluminum, cement, composites, glass, plastic and wood. Government regulatory

 
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initiatives mandating the use of such materials instead of steel, whether for environmental or other reasons, as well as the development of attractive alternative substitutes for steel products,may reduce demand for steel products and increase competition in the global steel industry. 

As part of our strategy to compete in thischallenging landscape, we will continue to invest in developing innovative products that offer the greatest potential returns and enhance the overall quality of our products, as well as make additional investments in the development of newmanufacturing technologies. However, there is no assurance that we will be able to continue to compete successfully in this economic environment or that the prolonged slowdown of the global economy or production over-capacity will not have amaterial adverse effect on our business, results of operations or financial condition. 

***Trading.*** Daewoo Internationalcompetes principally with six other Korean general trading companies, each of which is affiliated with a major domestic business group, as well as global trading companies based in other countries. In the domestic market, competition for exporttransactions on behalf of domestic suppliers and import transactions on behalf of domestic purchasers was limited, as most affiliated general trading companies of large Korean business groups generally relied on affiliate transactions for the bulkof their trading business. However, in recent years, many of these Korean general trading companies have reduced their reliance on their affiliated business group and transactions carried out on behalf of their member companies and instead havegenerally evolved to focus on segments of the import and export markets in which they have a competitive advantage. As a result, competition among Korean general trading companies in the area of traditional trade has become more intense. 

The overseas trading markets in which Daewoo International operates are also highly competitive. Daewoo International’s principal competitorsin the overseas trading markets include Korean trading companies that operate in various international markets, as well as foreign trading companies, particularly those based in Japan. As Daewoo International diversifies into businesses other thantraditional trading such as natural resources development, it also increasingly competes with other Korean and international companies involved in these businesses. Some of Daewoo International’s competitors may be more experienced and havegreater financial resources and pricing flexibility than Daewoo International, as well as more extensive global networks and wider access to customers. There is no assurance that Daewoo International will be able to continue to compete successfullyin this economic environment or that the prolonged slowdown of the global economy will not have a material adverse effect on its business, results of operations or financial condition. 

***Construction.*** POSCO E&C, our consolidated subsidiary in which we hold an 89.5% interest, operates in the highly competitiveconstruction industry. Competition is based primarily on price, reputation for quality, reliability, punctuality and financial strength of contractors. Intense competition among construction companies may result in, among other things, a decrease inthe price POSCO E&C can charge for its services, difficulty in winning bids for construction projects, an increase in construction costs and difficulty in obtaining high-quality contractors and qualified employees. 

In Korea, POSCO E&C’s main competition in the construction of residential and non-residential buildings, EPC (or engineering, procurementand construction) projects, urban planning and development projects and civil works projects consists of approximately ten major domestic construction companies, all of which are member companies of other large business groups in Korea and arecapable of undertaking larger-scale, higher-value-added projects that offer greater potential returns. A series of measures introduced by the Government over the past few years to regulate housing prices in Korea, as well as an increasing popularityof low-bid contracts in civil works project mandates, have contributed to increased competition in the Korean construction industry in recent years. 

Competition for new project awards in overseas markets is also intense. In these markets, POSCO E&C faces competition from local construction companies, as well as international construction companies fromother countries, including other major Korean construction companies with overseas operations. Construction companies from developed countries may be more 

 
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experienced, have greater financial resources and possess more sophisticated technology than POSCO E&C, while construction companies from developing countries often have the advantage oflower wage costs. Some of these competitors have achieved higher market penetration than POSCO E&C has in specific markets in which it competes, and POSCO E&C may need to accept lower margins in order for it to compete successfully againstthem. POSCO E&C’s failure to successfully compete in the domestic or overseas construction markets could adversely affect its market position and its results of operations and financial condition. 

***We may not be able to successfully execute our diversification strategy.***

In part to prepare for the eventual maturation of the Korean steel market, our overall strategy includes securing new growth engines by diversifyinginto new businesses related to our steel operations that we believe will offer greater potential returns, such as participation in EPC projects in the steel sector and natural resources development, as well as entering into new businesses notrelated to our steel operations such as power generation and alternative energy solutions, production of comprehensive materials such as lithium, silicon, carbon and magnesium, information and technology consulting services, and automation andsystem integration engineering services. From time to time, we may selectively acquire or invest in companies to pursue such diversification strategy. For example, on September 20, 2010, we acquired a controlling interest in DaewooInternational for Won 3.37 trillion. Daewoo International is a global trading company that primarily engages in trading of steel and raw materials as well as investing in energy and mineral development projects. It also manufactures and sellstextiles, operates a department store in Korea. 

The success of the overall diversification strategy will depend, in part, on our abilityto realize the growth opportunities and anticipated synergies. The realization of the anticipated benefits depends on numerous factors, some of which are outside our control, including the availability of qualified personnel, establishment of newrelationships and expansion of existing relationships with various customers and suppliers, procurement of necessary technology and know-how to engage in such businesses and access to investment capital at reasonable costs. The realization of theanticipated benefits may be impeded, delayed or reduced as a result of numerous factors, some of which are outside our control. These factors include: 

 
 • 
difficulties in integrating the operations of the acquired business, including information and accounting systems, personnel, policies and procedures, and inreorganizing or reducing overlapping operations, marketing networks and administrative functions, which may require significant amounts of time, financial resources and management attention; 

 
 • 
unforeseen contingent risks or latent liabilities relating to the acquisition that may become apparent in the future; 

 
 • 
difficulties in managing a larger business; and 

 
 • 
loss of key management personnel or customers. 

Accordingly, we cannot assure you that our diversification strategy can be completed profitably or that the diversification efforts will not adversely affect our combined business, financial condition and resultsof operations. 

***Expansion of our production operations abroad is important to our long-term success, and our limited experience inthe operation of our business outside Korea increases the risk that our international expansion efforts will not be successful.***

We conduct international trading and construction operations abroad, and our business relies on a global trading network comprised of overseassubsidiaries, branches and representative offices. Although many of our subsidiaries and overseas branches are located in developed countries, we also 

 
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operate in numerous countries with developing economies. In addition, we intend to continue to expand our steel production operations internationally by carefully seeking out promising investmentopportunities, particularly in China, India, Southeast Asia and Latin America, in part to prepare for the eventual maturation of the Korean steel market. We may enter into joint ventures with foreign steel producers that would enable us to rely onthese businesses to conduct our operations, establish local networks and coordinate our sales and marketing efforts abroad. To the extent that we enter into these arrangements, our success will depend in part on the willingness of our partnercompanies to dedicate sufficient resources to their partnership with us. 

In other situations, we may decide to establish manufacturingfacilities by ourselves instead of relying on partners. The demand and market acceptance for our products produced abroad are subject to a high level of uncertainty and are substantially dependent upon the market condition of the global steelindustry. We cannot assure you that our international expansion plan will be profitable or that we can recoup the costs related to such investments. 

Expansion of our trading, construction and production operations abroad requires management attention and resources. In addition, we face additional risks associated with our expansion outside Korea, including:

 
 • 
challenges caused by distance, language and cultural differences; 

 
 • 
higher costs associated with doing business internationally; 

 
 • 
legal and regulatory restrictions, including foreign exchange controls that might prevent us from repatriating cash earned in countries outside Korea;

 
 • 
longer payment cycles in some countries; 

 
 • 
credit risk and higher levels of payment fraud; 

 
 • 
currency exchange risks; 

 
 • 
potentially adverse tax consequences; 

 
 • 
political and economic instability; and 

 
 • 
seasonal reductions in business activity during the summer months in some countries. 

***We may from time to time engage in acquisitions for which we may be required to seek additional sources of capital.***

From time to time, we may selectively acquire or invest in companies or businesses that may complement our business. In order to finance theseacquisitions, we intend to use cash on hand, funds from operations, issuances of equity and debt securities, and, if necessary, financings from banks and other sources as well as entering into consortiums with financial investors. However, noassurance can be given that we will be able to obtain sufficient financing for such acquisitions or investments on terms commercially acceptable to us or at all. We also cannot assure you that such financings and related debt payment obligationswill not have a material adverse impact on our financial condition, results of operations or cash flow. 

***Further increases in, ornew impositions of, anti-dumping or countervailing duty proceedings may have an adverse impact on our export sales.***

We aresubject to a number of anti-dumping duties in India, Russia, Indonesia, Australia and Malaysia and a number of anti-dumping investigations in Brazil, Australia, Thailand, Mexico and Taiwan. Our products that have been subject to anti-dumping orcountervailing duty proceedings in the aggregate have not accounted for a material portion of our total sales in recent years. However, there 

 
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can be no assurance that increases in, or new impositions of, anti-dumping duties, countervailing duties, quotas or tariffs on our exports of products abroad may not have a material adverseimpact on our exports in the future. See “Item 4. Information on the Company — Item 4.B. Business Overview — Markets — Exports.” 

***We participate in overseas natural resources exploration, development and production projects abroad, which expose us to various risks.***

As part of consortia or through acquisitions of minority interests, we engage in overseas natural resources exploration, development and productionprojects in various locations, including a gas field exploration project in Myanmar, in which Daewoo International had invested approximately Won 1,126 billion as of December 31, 2012 and plans to make substantial further investments in thefuture. Daewoo International expects to generate revenue from the Myanmar gas field project starting in May 2013.****We may also selectively acquire or invest in companies or businesses that engage in such activities. As part of our efforts todiversify our operations, we intend to continue to expand our operations by carefully seeking out promising exploration, development and production opportunities abroad. To the extent that we enter into these arrangements, our success in theseendeavors will depend in part on the willingness of our partner companies to dedicate sufficient resources to their partnership with us. 

The demand and market acceptance for such activities abroad are subject to a substantially higher level of uncertainty than our traditional steelbusiness and are substantially dependent upon the market condition of the global natural resources industry as well as the political and social environment of the target countries. The performance of projects in which we participate may be adverselyaffected by the occurrence of military hostility, political unrest or acts of terrorism. In addition, some of our current exploration, development and production projects involve drilling exploratory wells on properties with no proven amount ofnatural resource reserves. Although all drilling, whether developmental or exploratory, involves risks, exploratory drilling involves greater risks of dry holes or failure to find commercial quantities of natural resources. We have limitedexperience in this business, and we cannot assure you that our overseas natural resources exploration, development and production projects will be profitable, that we will be able to meet the financing requirements for such projects, or that we canrecoup the costs related to such investments, which in turn could materially and adversely affect our business, financial condition and results of operations. 

***We may encounter problems with joint overseas natural resources exploration, development and production projects and large-scale infrastructure projects, which may materially and adversely affect ourbusiness.***

In recent years, we have begun to focus increasingly on overseas natural resources exploration, development andproduction projects. We typically pursue these natural resources exploration, development and production projects jointly with consortium partners or through acquisition of minority interests in such projects, and we expect to be involved in otherjoint projects in the future. We sometimes hold a majority interest in the projects among the consortium partners, but we often lack a controlling interest in the joint projects. Therefore, we may not be able to require that our joint ventures sellassets or return invested capital, make additional capital contributions or take any other action without the vote of at least a majority of our consortium partners. If there are disagreements between our consortium partners and us regarding thebusiness and operations of the joint projects, we cannot assure you that we will be able to resolve them in a manner that will be in our best interests. Certain major decisions, such as selling a stake in the joint project, may require the consentof all other partners. These limitations may adversely affect our ability to obtain the economic and other benefits we seek from participating in these projects. 

In addition, our consortium partners may: 

 
 • 
have economic or business interests or goals that are inconsistent with us; 

 
 • 
take actions contrary to our instructions, requests, policies or objectives; 

 
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be unable or unwilling to fulfill their obligations; 

 
 • 
have financial difficulties; or 

 
 • 
have disputes with us as to their rights, responsibilities and obligations. 

Any of these and other factors may have a material adverse effect on the performance of our joint projects and expose us to a number of risks,including the risk that the partners may be incapable of providing the required financial support to the partnerships and the risk that the partners may not be able to fulfill their other obligations, resulting in disputes not only between ourpartners and us, but also between the joint ventures and their customers. Such a material adverse effect on the performance of our joint projects may in turn materially and adversely affect our business, results of operations and financialcondition. 

***Cyclical fluctuations based on macroeconomic factors may adversely affect POSCO E&C’s business andperformance.***

In order to complement our steel operations, we engage in engineering and construction activities through POSCOE&C, an 89.5%-owned subsidiary. The construction segment, which accounted for approximately 7.4% of our consolidated sales in 2012 after adjusting for inter-company sales, is highly cyclical and tends to fluctuate based on macroeconomic factors,such as consumer confidence and income, employment levels, interest rates, inflation rates, demographic trends and policies of the Government. Although we believe that POSCO E&C’s strategy of focusing on high-value-added plant constructionand urban planning and development projects such as Songdo New City has enabled it to be exposed to a lesser degree to general economic conditions in Korea in comparison to some of its domestic competitors, our construction revenues have fluctuatedin the past depending on the level of domestic construction activity including new construction orders. POSCO E&C’s construction operations could suffer in the future in the event of a general downturn in the construction market resultingin weaker demand, which could adversely affect POSCO E&C’s business, results of operations or financial condition. 

***Manyof POSCO E&C’s domestic and overseas construction projects are on a fixed-price basis, which could result in losses for us in the event that unforeseen additional expenses arise with respect to the project.***

Many of POSCO E&C’s domestic and overseas construction projects are carried out on a fixed-price basis according to a predeterminedtimetable, pursuant to the terms of a fixed-price contract. Under such fixed-price contracts, POSCO E&C retains all cost savings on completed contracts but is also liable for the full amount of all cost overruns and may be required to paydamages for late delivery. The pricing of fixed-price contracts is crucial to POSCO E&C’s profitability, as is its ability to quantify risks to be borne by it and to provide for contingencies in the contract accordingly. 

POSCO E&C attempts to anticipate costs of labor, raw materials, parts and components in its bids on fixed-price contracts. However, the costsincurred and gross profits realized on a fixed-price contract may vary from its estimates due to factors such as: 

 
 • 
unanticipated variations in labor and equipment productivity over the term of a contract; 

 
 • 
unanticipated increases in labor, raw material, parts and components, subcontracting and overhead costs, including as a result of bad weather;

 
 • 
delivery delays and corrective measures for poor workmanship; and 

 
 • 
errors in estimates and bidding. 

If unforeseen additional expenses arise over the course of a construction project, such expenses are usually borne by POSCO E&C, and its profitfrom the project will be correspondingly 

 
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reduced or eliminated. If POSCO E&C experiences significant unforeseen additional expenses with respect to its fixed price projects, it may incur losses on such projects, which could have amaterial adverse effect on its financial condition and results of operations. 

***POSCO E&C’s domestic residential propertybusiness is highly dependent on the real estate market in Korea.***

The performance of POSCO E&C’s domestic residentialproperty business is highly dependent on the general condition of the real estate market in Korea. The construction industry in Korea is experiencing a downturn due to excessive investment in recent years in residential property developmentprojects, stagnation of real property prices and reduced demand for residential property, especially in areas outside of Seoul. In addition, as liquidity and credit concerns and volatility in the global financial markets increased significantlystarting in September 2008, there has been a general decline in the willingness by banks and other financial institutions in Korea to engage in project financing and other lending activities to construction companies, which may adversely impactPOSCO E&C’s ability to meet its desired funding needs. The Government has taken measures to support the Korean construction industry, including easing of regulations imposed on redevelopment of apartment buildings and resale restrictions inthe metropolitan areas, as well as reductions in property taxes. Although the Korean real estate market temporarily recovered in the second half of 2009 and into 2010, declines in demand and price took place in the Korean real estate market in 2011and 2012 due to the downturn of the domestic economic cycle and financial risk in Europe, and the overall prospects for the Korean real estate market in 2013 and beyond remain uncertain. 

***We are subject to environmental regulations, and our operations could expose us to substantial liabilities.***

We are subject to national and local environmental laws and regulations, including increasing pressure to reduce emission of carbon dioxide relatingto our manufacturing process, and our steel manufacturing and construction operations could expose us to risk of substantial liability relating to environmental or health and safety issues, such as those resulting from discharge of pollutants andcarbon dioxide into the environment, the handling, storage and disposal of solid or hazardous materials or wastes and the investigation and remediation of contaminated sites. We may be responsible for the investigation and remediation ofenvironmental conditions at currently and formerly operated manufacturing or construction sites. We may also be subject to associated liabilities, including liabilities for natural resource damage, third party property damage or personal injuryresulting from lawsuits brought by the Government or private litigants. In the course of our operations, hazardous wastes may be generated at third party-owned or operated sites, and hazardous wastes may be disposed of or treated at thirdparty-owned or operated disposal sites. If those sites become contaminated, we could also be held responsible for the cost of investigation and remediation of such sites, for any associated natural resource damage, and for civil or criminal fines orpenalties. 

***Failure to protect our intellectual property rights could impair our competitiveness and harm our business and futureprospects.***

We believe that developing new steel manufacturing technologies that can be differentiated from those of ourcompetitors, such as FINEX, strip casting and silicon steel manufacturing technologies, is critical to the success of our business. We take active measures to obtain protection of our intellectual property by obtaining patents and undertakingmonitoring activities in our major markets. However, we cannot assure you that the measures we are taking will effectively deter competitors from improper use of our proprietary technologies. Our competitors may misappropriate our intellectualproperty, disputes as to ownership of intellectual property may arise and our intellectual property may otherwise become known or independently developed by our competitors. Any failure to protect our intellectual property could impair ourcompetitiveness and harm our business and future prospects. 

 
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***We rely on trade secrets and other unpatented proprietary know-how to maintain our competitiveposition, and unauthorized disclosure of our trade secrets or other unpatented proprietary know-how could negatively affect our business.***

We rely on trade secrets and unpatented proprietary know-how and information. We enter into confidentiality agreements with each of our employees and consultants upon the commencement of an employment or consultingrelationship. These agreements generally provide that all inventions, ideas, discoveries, improvements and patentable material made or conceived by the individual arising out of the employment or consulting relationship and all confidentialinformation developed or made known to the individual during the term of the relationship is our exclusive property. We cannot assure the enforceability of these types of agreements, or that they will not be breached. We also cannot be certain thatwe will have adequate remedies for any breach. The disclosure of our trade secrets or other know-how as a result of such a breach could adversely affect our business. 

***We face the risk of litigation proceedings relating to infringement of intellectual property rights of third parties, which, if determined adversely to us, could cause us to lose significant rights, paysignificant damage awards or suspend the sale of certain products.***

Our success depends largely on our ability to develop and useour technology and know-how in a proprietary manner without infringing the intellectual property rights of third parties. The validity and scope of claims relating to technology and patents involve complex scientific, legal and factual questions andanalysis and, therefore, may be highly uncertain. In addition, because patent applications in many jurisdictions are kept confidential for an extended period before they are published, we may be unaware of other persons’ pending patentapplications that relate to our products or manufacturing processes. Accordingly, we face the risk of litigation proceedings relating to infringement of intellectual property rights of third parties. See “Item 8.A. Consolidated Statements andOther Financial Information — Legal Proceedings.” 

The plaintiffs in actions relating to infringement of intellectual propertyrights typically seek injunctions and substantial damages. Although patent and other intellectual property disputes are often settled through licensing or similar arrangements, there can be no assurance that such licenses can be obtained onacceptable terms or at all. Accordingly, regardless of the scope or validity of disputed patents or the merits of any patent infringement claims by potential or actual litigants, we may have to engage in protracted litigation. The defense andprosecution of intellectual property suits, patent opposition proceedings and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and managementpersonnel. An adverse determination in any such litigation or proceedings could subject us to pay substantial damages to third parties, require us to seek licenses from third parties and pay ongoing royalties or redesign certain products, or subjectus to injunctions prohibiting the manufacture and sale of our products or the use of technologies in certain jurisdictions. The occurrence of any of the foregoing could have a material adverse effect on our reputation, business, financial conditionand results of operations. 

***Escalations in tensions with North Korea could have an adverse effect on us and the market value ofour common shares and ADSs.***

Relations between Korea and North Korea have been tense throughout Korea’s modern history. Thelevel of tension between the two Koreas has fluctuated and may increase abruptly as a result of future events. In particular, since the death of Kim Jong-il in December 2011, there has been increased uncertainty with respect to the future of NorthKorea’s political leadership and concern regarding its implications for political and economic stability in the region. Although Kim Jong-il’s third son, Kim Jong-eun, has assumed power as his father’s designated successor, thelong-term outcome of such leadership transition remains uncertain. 

 
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In addition, there have been heightened security concerns in recent years stemming from NorthKorea’s nuclear weapon and long-range missile programs as well as its hostile military and other actions against Korea. Some of the significant incidents in recent years include the following: 

 
 • 
In early April 2013, North Korea blocked access to the inter-Korean industrial complex in its border city of Gaeseong to South Koreans, while the U.S. deployednuclear-capable stealth bombers and destroyers to Korean air and sea space. 

 
 • 
In late March 2013, North Korea stated that it had entered “a state of war” with Korea, declaring the 1953 armistice invalid, and put its artillery atthe highest level of combat readiness to protest the Korea-United States allies’ military drills and additional sanctions imposed on North Korea for its missile and nuclear tests. 

 
 • 
North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and conducted three rounds of nuclear tests between October 2006to February 2013, which increased tensions in the region and elicited strong objections worldwide. In response, the United Nations Security Council unanimously passed resolutions that condemned North Korea for the nuclear tests and expandedsanctions against North Korea, most recently in March 2013. 

 
 • 
In December 2012, North Korea launched a satellite into orbit using a long-range rocket, despite concerns in the international community that such a launch wouldbe in violation of the agreement with the United States as well as the United Nations Security Council resolutions that prohibit North Korea from conducting launches that use ballistic missile technology. 

 
 • 
In March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Koreaof causing the sinking, while North Korea denied responsibility. Moreover, in November 2010, North Korea fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the de factomaritime boundary between Korea and North Korea on the west coast of the Korean peninsula, causing casualties and significant property damage. The Government condemned North Korea for the attack and vowed stern retaliation should there be furtherprovocation 

North Korea’s economy also faces severe challenges. For example, in November 2009, the North Koreangovernment redenominated its currency at a ratio of 100 to 1 as part of a currency reform undertaken in an attempt to control inflation and reduce income gaps. In tandem with the currency redenomination, the North Korean government banned the use orpossession of foreign currency by its residents and closed down privately run markets, which led to severe inflation and food shortages. Such developments may further aggravate social and political tensions within North Korea. 

There can be no assurance that the level of tension on the Korean peninsula will not escalate in the future. Any further increase in tensions, whichmay occur, for example, if North Korea experiences a leadership crisis, high-level contacts between Korea and North Korea break down or military hostilities occur, could have a material adverse effect on our business, results of operations andfinancial condition and the market value of our common shares and ADSs. 

***If you surrender your ADRs to withdraw shares of ourcommon stock, you may not be allowed to deposit the shares again to obtain ADRs.***

Under the deposit agreement, holders of sharesof our common stock may deposit those shares with the ADR depositary’s custodian in Korea and obtain ADRs, and holders of ADRs may surrender ADRs to the ADR depositary and receive shares of our common stock. However, under current Korean lawsand regulations, the depositary bank is required to obtain our prior consent for the number of 

 
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shares to be deposited in any given proposed deposit that exceeds the difference between (i) the aggregate number of shares deposited by us for the issuance of ADSs (including deposits inconnection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (ii) the number of shares on deposit with the depositary bank at the time of such proposed deposit. It ispossible that we may not give the consent. As a result, if you surrender ADRs and withdraw shares of common stock, you may not be able to deposit the shares again to obtain ADRs. See “Item 10. Additional Information — Item 10.D.Exchange Controls.” 

***You may not be able to exercise preemptive rights for additional shares of common stock and may sufferdilution of your equity interest in us.***

The Commercial Code and our articles of incorporation require us, with some exceptions,to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we issue new shares to persons other than our shareholders (See “Item 10.B. Memorandum andArticles of Association — Preemptive Rights and Issuance of Additional Shares”), a holder of our ADSs will experience dilution of such holding. If none of these exceptions is available, we will be required to grant preemptive rights whenissuing additional common shares under Korean law. Under the deposit agreement governing the ADSs, if we offer any rights to subscribe for additional shares of our common stock or any rights of any other nature, the ADR depositary, afterconsultation with us, may make the rights available to you or use reasonable efforts to dispose of the rights on your behalf and make the net proceeds available to you. The ADR depositary, however, is not required to make available to you any rightsto purchase any additional shares unless it deems that doing so is lawful and feasible and: 

 
 • 
a registration statement filed by us under the Securities Act is in effect with respect to those shares; or 

 
 • 
the offering and sale of those shares is exempt from or is not subject to the registration requirements of the Securities Act. 

We are under no obligation to file any registration statement under the Securities Act to enable you to exercise preemptive rights in respect of thecommon shares underlying the ADSs, and we cannot assure you that any registration statement would be filed or that an exemption from the registration requirement under the Securities Act would be available. Accordingly, if a registration statementis required for you to exercise preemptive rights but is not filed by us, you will not be able to exercise your preemptive rights for additional shares and may suffer dilution of your equity interest in us. 

***U.S. investors may have difficulty enforcing civil liabilities against us and our directors and senior management.***

We are incorporated in Korea with our principal executive offices located in Seoul. The majority of our directors and senior management areresidents of jurisdictions outside the United States, and the majority of our assets and the assets of such persons are located outside the United States. As a result, U.S. investors may find it difficult to effect service of process within theUnited States upon us or such persons or to enforce outside the United States judgments obtained against us or such persons in U.S. courts, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. It mayalso be difficult for an investor to enforce in U.S. courts judgments obtained against us or such persons in courts in jurisdictions outside the United States, including actions predicated upon the civil liability provisions of the U.S. federalsecurities laws. It may also be difficult for a U.S. investor to bring an action in a Korean court predicated upon the civil liability provisions of the U.S. federal securities laws against our directors and senior management and non-U.S. expertsnamed in this annual report. 

 
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***We could be adversely affected if the U.S. government were to determine that ouraffiliate’s Iran-related business activities are sanctionable under the U.S. Iranian sanction laws and regulations.***

Weacquired a controlling interest in Sungjin Geotec Co., Ltd. (“Sungjin Geotec”), a manufacturer of specialized equipment used in the power and energy industries in May 2010, and we currently hold a 33.0% interest in the company. In recentyears, Sungjin Geotec entered into contracts with various suppliers to supply equipment for the development of natural gas fields in Iran, including natural gas fields located in South Pars that is led by Pars Oil and Gas Company, a subsidiary ofNational Iranian Oil Company. Sungjin Geotec recognized revenues of approximately Won 27 billion in 2010, Won 240 billion in 2011 and Won 134 billion in 2012, and net profits of approximately Won 1 billion in 2010, Won 15 billion in 2011 and Won 25billion in 2012 related to such activities. Sungjin Geotec has completed or terminated all of its remaining outstanding supply contracts to sell equipment for the development of natural gas fields in Iran, and it does not plan to engage in any saleof equipment in Iran related to the country’s development of petroleum resources in the future. 

In July 2010, the United Statesadopted legislation that expands U.S. economic sanctions against foreign companies doing business with Iran in certain sectors. The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (the “CISADA”) expands the scopeof sanctionable activities by, among other things, broadening the definition of “investment” under the Iran Sanctions Act (the “ISA”) arguably to include the supply of goods for use in petroleum and gas production. The CISADAalso expands the severity of potential sanctions available under the ISA and imposes mandatory investigation and reporting requirements designed to increase the likelihood of enforcement. The CISADA requires the imposition of sanctions againstparties found by the U.S. administration, following an investigation, to have engaged in conduct sanctionable under the ISA, subject to certain waiver provisions and exceptions. 

Under the ISA, as amended, sanctions can also be imposed against a company that has actual knowledge of, or should have known of, sanctionableconduct engaged in by another company that it owns or controls. A range of sanctions may be imposed on companies that engage in sanctionable activities, including among other things the blocking of any property subject to U.S. jurisdiction in whichthe sanctioned company has an interest, which could include a prohibition on transactions or dealings involving securities of the sanctioned company. By its terms, the CISADA is applicable to certain investments in Iran that commenced on or afterJuly 1, 2010. 

There can be no assurance that Sungjin Geotec’s Iran-related business activities do not constitute sanctionableactivities or that we will not be subjected to sanctions under the ISA as amended by the CISADA. Our business and reputation could be adversely affected if the U.S. government were to determine that Sungjin Geotec’s Iran-related businessactivities constitute sanctionable activity attributable to us. Investors in our securities may also be adversely affected if we are sanctioned under the CISADA or if their investment in the securities is restricted under any sanctions regimes withwhich the investors are required to comply. As noted above, sanctions under the ISA could include the blocking of any property in which we have an interest, which would effectively prohibit all U.S. persons from receiving any payments from us, orotherwise acquiring, holding, withholding, using, transferring, withdrawing, transporting, importing, or exporting any property in which we have any interest. 

***We expect to continue operations and investments relating to countries targeted by United States and European Union economic sanctions.***

The U.S. Department of the Treasury’s Office of Foreign Assets Control, or “OFAC,” enforces certain laws and regulations (“OFACSanctions”) that impose restrictions upon U.S. persons and, in some instances, foreign entities owned or controlled by U.S. persons, with respect to activities or transactions with certain countries, governments, entities and individuals thatare the subject of OFAC 

 
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Sanctions (“U.S. Sanctions Targets”). U.S. persons are also generally strictly prohibited from facilitating such activities or transactions. Similarly, the European Union enforcescertain laws and regulations (“E.U. Sanctions”) that impose restrictions upon nationals of E.U. member states, persons located within E.U. member states, entities incorporated or constituted under the law of an E.U. member state, orbusiness conducted in whole or in part in E.U. member states with respect to activities or transactions with certain countries, governments, entities and individuals that are the subject of E.U. Sanctions (“E.U. Sanctions Targets” andtogether with U.S. Sanctions Targets, “Sanctions Targets”). E.U. persons are also generally prohibited from activities that promote such activities or transactions. 

We engage in limited business activities in countries that are deemed Sanctions Targets, including Iran, Syria and Sudan. We produce and export, typically through our sales subsidiaries, steel products to suchcountries, including automotive steel sheets and other steel materials to Iranian entities. Our subsidiaries also engage in limited business activities in countries that are deemed Sanctions Targets. In particular, Daewoo International, a globaltrading company in which we hold a 60.3% interest, engages in the trading of steel, raw materials and other items with entities in countries that are deemed Sanctions Targets, including Iran and Sudan. Our activities and investments do not involveany U.S. goods or services, and we do not export or re-export U.S. goods or services directly or indirectly to any Sanctions Target. Our activities and investments in Iran, Syria and Sudan accounted for approximately 1.7% of our consolidatedrevenues in 2010, 3.4% in 2011 and 1.4% in 2012. 

We expect to continue to engage in business activities and make investments incountries that are deemed Sanctions Targets over the foreseeable future. Although we believe that OFAC Sanctions under their current terms are not applicable to our current activities, our reputation may be adversely affected, some of our U.S.investors may be required to divest their investments in us under the laws of certain U.S. states or under internal investment policies or may decide for reputational reasons to divest such investments. We are aware of initiatives by U.S.governmental entities and U.S. institutional investors, such as pension funds, to adopt or consider adopting laws, regulations, or policies prohibiting transactions with or investment in, or requiring divestment from, entities doing business withcountries identified as state sponsors of terrorism. We cannot assure you that the foregoing will not occur or that such occurrence will not have a material adverse effect on the value of our securities. 

***This annual report contains “forward-looking statements” that are subject to various risks and uncertainties.***

This annual report contains “forward-looking statements” that are based on our current expectations, assumptions, estimates andprojections about our company and our industry. The forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as“anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” “should,” and similar expressions. Those statements include, among other things, the discussions of ourbusiness strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. We caution you that reliance on any forward-looking statement involves risks and uncertainties, and thatalthough we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could beincorrect. The uncertainties in this regard include, but are not limited to, those identified in the risk factors discussed above. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans andobjectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances. 

 
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**Item 4.  *****Information on the Company*******

**Item 4.A.  *****History and Development of the Company*******

We were established by the Government on April 1, 1968, under the Commercial Code, to manufacture and distribute steel rolled products andplates in the domestic and overseas markets. The Government owned more than 70% of our equity until 1988, when the Government reduced its ownership of our common stock to 35% through a public offering and listing our shares on the KRX KOSPI Market.In December 1998, the Government sold all of our common stock it owned directly, and The Korea Development Bank completed the sale of our shares that it owned in September 2000. The Government no longer holds any direct interest in us, and ouroutstanding common stock is currently held by individuals and institutions. See “Item 7. Major Shareholders and Related Party Transactions — Item 7A. Major Stockholders.” 

Our legal and commercial name is POSCO. Our principal executive offices are located at POSCO Center, 892 Daechi-4-dong, Gangnam-gu, Seoul, Korea135-777, and our telephone number is (822) 3457-0114. 

**Item 4.B.  *****BusinessOverview*******

**The Company**

We are the largest fully integrated steel producer in Korea, and one of the largest steel producers in the world, based on annual crude steel production. We produced approximately 39.7 million tons of crudesteel in 2012 and approximately 39.1 million tons in 2011, a substantial portion of which was produced at Pohang Works and Gwangyang Works. As of December 31, 2012, Pohang Works had 16.7 million tons of annual crude steel andstainless steel production capacity, and Gwangyang Works had an annual crude steel production capacity of 20.8 million tons. We believe Pohang Works and Gwangyang Works are two of the most technologically advanced integrated steel facilities inthe world. We manufacture and sell a diversified line of steel products, including cold rolled and hot rolled products, stainless steel products, plates, wire rods and silicon steel sheets, and we are able to meet a broad range of customer needsfrom manufacturing industries that consume steel, including automotive, shipbuilding, home appliance, engineering and machinery industries. 

We sell primarily to the Korean market. Domestic sales accounted for 52.0% of our total revenue from steel products produced and sold by us in 2012 and 50.2% in 2011. On a non-consolidated basis, we believe that wehad an overall market share of approximately 42% of the total sales volume of steel products sold in Korea in 2012 and approximately 41% in 2011. Our export sales and overseas sales to customers abroad accounted for 48.0% of our total revenue fromsteel products produced and sold by us in 2012 and 49.8% in 2011. Our major export market is Asia, with China accounting for 28.9%, Asia other than China and Japan accounting for 26.7%, and Japan accounting for 14.1% of our total steel exportrevenue from steel products produced and exported by us in 2012 and Asia other than China and Japan accounting for 23.2%, China 28.3% and Japan 13.8% of our total steel export revenue from steel products produced and exported by us in 2011.

We also engage in businesses that complement our steel manufacturing operations as well as carefully seek out promising investmentopportunities to diversify our businesses both vertically and horizontally, in part to prepare for the eventual maturation of the Korean steel market. POSCO E&C, our consolidated subsidiary in which we hold an 89.5% interest, is one of theleading engineering and construction companies in Korea that primarily engages in the planning, design and construction of industrial plants and architectural works and civil engineering. Daewoo International, our consolidated subsidiary in which wehold a 60.3% interest, is a global trading company that primarily engages in trading of steel and raw materials as well as investing in energy and mineral development projects throughout the world. POSCO Energy Corporation, our wholly-ownedconsolidated subsidiary in which we hold an 89.0% interest, is the largest private power generation company in Korea. 

 
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We generated revenue of Won 63,604 billion and profit for the period of Won 2,386 billion in 2012,compared to revenue of Won 68,939 billion and profit for the period of Won 3,714 billion in 2011. We had total assets of Won 79,266 billion and total equity of Won 42,429 billion as of December 31, 2012, compared to total assets of Won 78,409billion and total equity of Won 40,730 billion as of December 31, 2011. 

**Business Strategy**

Leveraging on our success during the past four decades, our goal is to strengthen our position as one of the leading steel producers in the worldand strive to rank among the top three global steel companies in technology leadership, operational excellence and production capacity. In order to compete effectively in the dynamic global market environment driven by emerging economies andincreasing demand for more environmentally friendly products, we are committed to leveraging our competitive advantages and further enhancing our leadership positions. We believe that our proprietary technologies and expertise in developingenvironmentally-friendly steel production facilities, ability to independently construct such facilities, and know-how in their efficient operation and management enables us to develop differentiated steel products at a highly competitive coststructure. 

We also plan to selectively explore opportunities in growth industries that are integral to our overall business model, andwe have identified steel, comprehensive materials, energy and new businesses as our key areas of focus. We seek to strengthen our competitiveness and pursue growth through the following core business strategies: 

***Seek Opportunities for EPC Projects and Expand Our Production and Supply Chain Management Infrastructure Abroad***

Drawing on our expertise in steel production, construction capabilities of POSCO E&C and natural resources exploration and production know-howof Daewoo International, POSCO Group plans to carefully seek out promising business opportunities abroad for EPC (or engineering, procurement and construction) projects in the steel sector. We seek out promising investment opportunities abroad,primarily in China, India, Southeast Asia and Latin America, in part to prepare for the eventual maturation of the Korean steel market. We believe that China, India, Southeast Asia and Latin America will continue to offer substantial growthopportunities, and we plan to selectively seek investment opportunities to secure development rights to natural resources and construct steel production facilities. For example, we obtained clearance from the Government of India in May 2011 fordeforestation and we are currently in the process of acquiring the land on which the integrated steel mill will be constructed. However, the National Green Tribunal, a special court in India that handles the expeditious disposal of cases pertainingto environmental issues, ordered in March 2012 that the Ministry of Environment should reassess the conditions on which clearance was granted for the project, and the ministry is currently in the process of revalidating its environmental clearance.With respect to development of iron ore mines in Orissa State, all hearings have been completed, and we are waiting for the final verdict from the Indian Supreme Court. 

In June 2010, we also signed a memorandum of understanding with the Government of Karnataka, a state in southwest India, to construct an integrated steel mill in Karnataka, and we are in discussions with theGovernment of Karnataka to obtain a mining lease and secure land with appropriate infrastructure. 

We are also building a globaldistribution network of supply chain management centers to provide processing and logistics services and more effectively respond to changes in consumer trends in the global steel market. In 2012, we operated 42 supply chain management centersworldwide that recorded aggregate sales of 4.0 million tons of steel products.****We plan to continue expanding our global network of supply chain management centers. 

 
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***Maintain Technology Leadership in Steel Manufacturing***

As part of our strategy, we have identified core products that we plan to further develop, such as premium automotive steel sheets, silicon steeland API-grade steel, and we will continue to invest in developing innovative products that offer the greatest potential returns and enhance the overall quality of our products. In order to increase our competitiveness and the proportion of our salesof higher margin, higher value-added products, we plan to make additional investments in the development of new manufacturing technologies and upgrade our facilities through continued modernization and rationalization. 

We will continue to refine FINEX, a low cost, environmentally friendly steel manufacturing process that optimizes our production capacity byutilizing non-agglomerated iron ore fines and using non-coking coal as an energy source and a reducing agent. We believe that FINEX offers considerable environmental and economic advantages through elimination of major sources of pollution such assintering and coking plants, as well as reducing operating and raw material costs. In recent years, we have developed proprietary manufacturing technology using a compact endless cast rolling mill that combines the FINEX process with an advancedbasic oxygen steelmaking process that uses more scrap in place of pig iron, which enables us to manufacture products at a highly competitive cost structure with lower carbon dioxide emission. Our compact endless cast rolling mill directly castscoils from liquid steel and uses a rolling process that rolls hot rolled coils up to 40 slabs at a time. 

***Diversify intoProduction of Comprehensive Materials, including Lithium, Silicon, Carbon and Magnesium***

We plan to leverage our expertise inproduction of various steel-applied materials and venture into the fast-growing and high value-added business of producing environmentally friendly comprehensive materials. We have identified lithium, carbon and magnesium as our main investmentareas. Demand for lithium, which is used as an anode material in lithium ion batteries, has been increasing in recent years, and we have developed proprietary technology to extract lithium from its brine in approximately one month compared to twelvemonths through conventional production processes. We believe we are also able to leverage our expertise in production of crude steel to cost-effective production of carbon and magnesium, which have wide application of industrial use. 

***Further Develop Our Capabilities to become an Integrated Provider of Energy Solutions***

We plan to pursue strategic synergies with our member companies of the POSCO Group to further strengthen our capabilities in the energy industry.POSCO Energy Corporation is the largest private power generation company in Korea. POSCO E&C is one of the leading engineering and construction companies in Korea with expertise in the design and construction of power plants. DaewooInternational engages in various natural resources procurement and energy development projects around the world. In order to secure adequate procurement of principal raw materials, we have also invested in and will continue to explore additionalinvestment opportunities in various raw material development projects abroad, as well as enter into long-term contracts with leading suppliers of iron ore, coal and nickel, principally in Australia and Brazil. We believe that the energy industry isa sustainable business area that offers us attractive opportunities. We will continue to seek opportunities in natural resources development and further expand our power generation and alternative energy solutions businesses, as well as pursueparticipation in additional power plant projects abroad. 

***Pursue Cost-Cutting through Operational and Process Innovations***

We seek to achieve cost reductions in this era of increasing raw material costs through our company wide process for innovationand enhancing efficiency of operations. We believe that strategic cost cutting measures through utilization of efficient production methods and management discipline will strengthen our corporate competitiveness. After implementation of Six Sigmainnovations in recent 

 
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years, we are now implementing the Quick Six Sigma program, a customized program that we believe will enhance our corporate culture that rewards innovative ideas at all stages of our operationsand enable us to benchmark successful innovations to all relevant processes within the company. We will also strive to invest more in human resources development to nurture employees who are capable of working in the global environment. 

***Selectively Seek Opportunities in Growth Industries***

We will continue to selectively seek opportunities in growth industries to diversify our business both vertically and horizontally. Through POSCO ICT Co., Ltd., a 72.5%-owned subsidiary, we engage in informationand technology consulting services as well as automation and system integration engineering services. POSCO E&C is one of the leading engineering and construction companies in Korea that primarily engages in the planning, design and constructionof industrial plants and architectural works and civil engineering. On September 20, 2010, we acquired a controlling interest in Daewoo International Corporation for Won 3.37 trillion. Daewoo International is a global trading company thatprimarily engages in trading of steel and raw materials as well as investing in energy development projects. We will continue to selectively seek opportunities to identify new growth engines and diversify our operations. 

**Major Products**

We manufacture and sell abroad line of steel products, including the following: 

 
 • 
cold rolled products; 

 
 • 
hot rolled products; 

 
 • 
stainless steel products; 

 
 • 
plates; 

 
 • 
wire rods; and 

 
 • 
silicon steel sheets. 

Thetable below sets out our revenue of steel products produced by us and directly sold to external customers, which are recognized as external revenue of the Steel Segment, by major steel product categories for the periods indicated. Such amounts donot include steel products produced by us and sold to our consolidated subsidiaries. 

 
   **For the Year Ended December 31,**    **2010 (1)**  **2011**  **2012** 
**Steel Products**
  **Billions of**