How South Korea Built POSCO: From War Ruins to Steel Giant

Name: South Korea Defied the Gods to Build its Steel Colossus
Uploaded: 2026-04-23T23:00:07+00:00
Duration: 22 min 34 s
Channel: Asianometry
Description: Summary and key takeaways on South Korea Defied the Gods to Build its Steel Colossus — Summary, covering Beginnings South Korea emerged from the Korean War

Asianometry

Apr 23, 2026

•

22 min video

•

2 min read

YouTube video ID: 8fbhE0F-rjA

Source: YouTube video by Asianometry — Watch original video

PDF

South Korea emerged from the Korean War with a per‑capita income of roughly $80 and 75 % of its pre‑war steel and iron capacity destroyed. President Park Chung‑hee declared steel the prerequisite for automotive, shipbuilding, and heavy‑industry growth, framing it as the foundation of national security and economic independence.

Expertise and Capital

The United States and the World Bank dismissed early proposals, urging a focus on light industry, energy, and communications. In 1966 the Korea International Steel Associates (KISA) formed as a consortium of U.S. and European firms to raise $130 million, but the World Bank officially rejected a loan in 1968, deeming the project economically infeasible.

TJ Park and Pohang

Park Tae‑Joon, known as TJ Park, served as President Park’s chief secretary before leading the Korea Tungsten Mining Company. He lobbied Japanese officials and steelmakers after KISA’s collapse, securing a new partnership. TJ Park selected the coastal town of Pohang as the site for the integrated steel mill, and POSCO was founded in 1968.

KISA Collapse and Japanese Partnership

Normalization of relations with Japan in 1965 opened a channel for financing. Japan’s Ministry of International Trade and Industry (MITI) saw an opportunity to export steel‑making equipment and secure a nearby market. Negotiations in 1969 produced a compromise: Japan supplied older main‑line technology and a smaller continuous‑casting unit, linking the project to the Korea–Japan claims settlement funds.

Building POSCO

POSCO adopted a “backward” construction strategy, beginning with rolling mills that processed imported slabs into finished products while the rest of the plant remained under construction. This approach generated immediate cash flow and allowed Phase 1 to finish in three years (1970‑1973), far faster than the global average of four to nine years. The later Gwangyang Steel plant, launched in 1982, employed advanced continuous‑casting technology, achieving production costs 60 % lower than the average American mill.

Mechanisms & Explanations

Backward Construction reversed the usual sequence of iron‑making to finished‑product manufacturing. By starting with rolling mills, POSCO could sell steel products before completing its blast‑furnace complex, securing revenue early.

Continuous Casting enabled molten steel to be cast directly into final shapes, eliminating the energy‑intensive step of forming intermediate ingots or billets and improving efficiency.

Outcomes

By 2024 POSCO ranks eighth worldwide in steel production, a testament to the strategic vision, international navigation, and innovative execution that transformed a war‑torn nation into a heavy‑industry powerhouse.

Takeaways

South Korea turned a post‑war economy with a per‑capita income of $80 into a steel powerhouse by prioritizing steel as essential for national security and industrial growth.
Early attempts to secure Western financing failed, leading to the formation and collapse of KISA before Japan became the decisive partner.
TJ Park’s leadership and the selection of Pohang enabled POSCO to launch in 1968, leveraging Japanese reparations and equipment exports.
POSCO’s backward construction strategy generated early revenue by processing imported slabs while the plant was still being built, completing Phase 1 in just three years.
The adoption of continuous‑casting technology at Gwangyang Steel cut production costs by 60 % compared with average American mills, helping POSCO achieve an eighth‑place global ranking by 2024.

Frequently Asked Questions

Why did POSCO use a backward construction strategy?

POSCO started with rolling mills to process imported steel slabs, allowing it to sell finished products while the rest of the plant was still under construction. This generated immediate cash flow and shortened the overall build time to three years, far faster than typical projects.

How did Japan’s reparations influence POSCO’s financing?

Japan linked the steel‑mill project to the Korea–Japan claims settlement, providing older equipment and a smaller continuous‑casting unit in exchange for a guaranteed market for its exports. This partnership supplied the capital and technology needed after the World Bank’s rejection.

Who is Asianometry on YouTube?

Asianometry is a YouTube channel that publishes videos on a range of topics. Browse more summaries from this channel below.

Does this page include the full transcript of the video?

Yes, the full transcript for this video is available on this page. Click 'Show transcript' in the sidebar to read it.

Helpful resources related to this video

If you want to practice or explore the concepts discussed in the video, these commonly used tools may help.

Biography Of Park Tae-Joon Posco Founder Recommended

Provides a detailed account of the life and leadership of TJ Park, the central figure in the development of South Korea's steel industry.

Amazon →

History Of South Korean Economic Development Book

Explains the broader context of the 'Miracle on the Han River' and the industrial policies that transformed the nation.

Amazon →

Book On The History Of Steel Industry

Offers technical and historical context on how steel production shaped global economies and modern infrastructure.

Amazon →

Links may be affiliate links. We only include resources that are genuinely relevant to the topic.

Summarize another video

Full Transcript YouTube

South Korean President Park 
Chung-hee believed that steel  
is national power. He wanted a huge 
integrated steel mill in South Korea.
But the Western powers were skeptical. South Korea  
was extremely poor, without substantial 
iron reserves. Their workers, uneducated.
For South Korea to go straight to what 
was then the most capital-intensive  
heavy industry was to defy economic 
orthodoxy. Too soon. Too inefficient.
But Park Chung-hee believed Korea needed 
steel. So he pushed his country to build  
one of the world's most advanced steel companies.
In today's video, we go back to 
the world of steel and recount  
one of South Korea's most iconic companies: POSCO.
## Beginnings
When Park Chung-hee took power in 1961, 
South Korea was in a perilous state.
The country was still recovering from 
the devastation of the Korean War. Its  
security heavily depended on aid from its ally,  
the United States. But this relationship 
was testy even in the best of times.
And the post-war South Korean economy was 
poor - struggling from trade deficits,  
low foreign exchange reserves, rampant 
inflation, and stalling growth.  
The per capita income was about $80 and the 
country can barely keep itself from starving.
To solve this, Park imagined a massive 
industrialization effort to make the South Korean  
economy "self-sustaining". This effort needed 
steel. Modern steel made right in South Korea.
However, many of the steel mills built 
during Korea’s colonial era were located  
in North Korea. Prior to the Korean War, 
president Syngman Rhee tried to build a  
South Korean steel industry, but failed due to 
a lack of capital and government coordination.
And then there was the Korean War itself, which 
devastated the country's industrial areas. The  
Bank of Korea calculated that 75% of the country's 
pre-war capacity in steel and iron was destroyed.
Park Chung-hee sought to rebuild 
all that capacity and more.  
He was convinced that South Korea cannot 
forge its other key industries - automotive,  
shipbuilding, heavy industry 
- without first making steel.
Thus, he made iron and steel-making the focus  
of his administration’s first and 
second five-year development plans.
## Expertise and Capital
To build a massive integrated steel mill, the 
South Koreans needed expertise and lots of cash.
Park Chung-hee arm-twisted 
four chaebol to form Korea  
Integrated Steel Mill Inc and sought partners.
They first approached West Germany. An 
agreement was signed for a feasibility  
study in March 1962, but fell through 
due to a lack of financial resources.
Korea Integrated tried again 
in late 1962 - agreeing with  
an American investor consortium for a 
steel mill in Ulsan with capacity of  
about 250,000 to 300,000 tons per year. The 
issue again however was getting the money.
Park's administration took control of 
the central bank and financial sector  
to funnel domestic savings towards his 
projects. But the South Korean people  
were very poor back then. There 
was not enough domestic savings.
So if they wanted to get enough money 
to build an integrated steel plant,  
it had to come from abroad.
## KISA
The South Korean government first turned to the
Americans for economic aid. But 
this turned out to be tricky.
Both the US Agency for International 
Development and the US Import-Export  
Bank declined. The US Government was 
urging Park towards democratization  
and civilian rule. Issuing foreign aid 
felt like sending the wrong message.
USAID also remarked that the South 
Korean government should be focusing  
on other sectors like energy, transportation, 
machinery and communication rather than steel.
But Park Chung-hee single-mindedly 
pursued steel. After the Korea  
Integrated Steel failure, he deployed 
personal diplomacy for his next effort.
During a US trip in 1965 to meet 
American president Lyndon Johnson,  
he also traveled to Pittsburgh to visit 
Jones & Laughlin Steel Corporation's  
Aliquippa plant. Reporters reported 
him watching the steelworks and saying:
> "This is the most impressive ... 
all this fine modern equipment."
During this trip, Park met with 
Fred Foy, the chairman of Koppers,  
to discuss cooperation. Koppers was then 
one of the world's leading steel mill  
engineering firms. Foy was receptive, 
as was the World Bank at the time.
Thus formed in December 1966, a 
consortium of players from the  
US and Europe called Korea International 
Steel Associates or KISA. Their goal was  
to raise the money for and build 
a modern steel mill in Korea.
## KISA Stalls
KISA's job was to build a steel mill. 
And Park was not screwing around.
He announced this steel mill during his  
presidential campaign in 1967. When 
progress stalled for a few months,  
Park replaced his deputy Prime Minister and 
the head of his Economic Planning Board.
The new Board then negotiated a contract 
with KISA, coming to a tentative agreement  
in April 1967 where KISA would raise 
$130 million from both foreign and  
domestic sources to fund a 600,000 
ton capacity integrated steel mill.
Meanwhile, Park Chung-hee began looking at 
potential Korean partners to lead the steel  
mill build. By the summer of 1967, one 
company emerged as the leader to do it:  
Korea Tungsten Mining, led by one of 
South Korea's rising stars, TJ Park.
## TJ Park
Park Tae-Joon - I shall refer to him as TJ (박태준) 
because “Park Park Park Park” - was born in 1927.
As a child, he went to Japan with his 
father for work. He then studied business  
at Waseda University before returning 
to Korea upon the end of World War II.
He then joined the military where he fought 
with honor in the Korean War. TJ first met Park  
Chung-hee at the military academy when the former 
was a cadet and the latter, a company commander.
The elder Park took a liking to the cadet and 
respected his intelligence. Also trusted him.  
TJ did not participate in the 1961 military coup,  
supposedly because if the coup were to fail, then 
TJ was to look after Park Chung-hee's family.
After the coup succeeded, TJ 
served as Park Chung-hee's chief  
secretary for three years. He then 
declined to return to the military,  
and in 1964 was sent by his government to Japan 
to build up business contacts within industry.
He returned to South Korea a few 
years later and was put in charge  
of a state-owned enterprise called 
the Korea Tungsten Mining Company.
The company controlled Sangdong Mine 
- one of the world's largest tungsten  
mines - and was one of the few sources 
of foreign currency for the country but  
had fallen in hard times. With effort, 
he brought them back into the black.
## Pohang
Park Chung-hee ordered TJ 
to start preparations for  
the construction of KISA’s integrated steel mill.
First things first. Where to put it? They 
spent a year evaluating five different sites  
including Ulsan. In the end, they chose a sleepy 
fishing town with about 50,000 residents: Pohang.
Ulsan was the original front-runner, but 
their own growing industry meant they  
no longer had available space. Pohang 
still had lots of open land and fresh  
water as well as a deep-water harbor 
to receive iron ore and coking coal.
It was also far enough from North Korea to 
not be immediately threatened by artillery.  
And far enough from Seoul to diversify 
away from the mega-city. Local officials  
emphasized the mill's impact on the 
then-impoverished Korean east coast.
Thus in April 1968, the Pohang Iron 
and Steel company was founded as a  
private entity with 300 million 
won from the government and 100  
million from Korea Tungsten. Almost 
immediately, they called it POSCO.
## KISA Falls Apart
But meanwhile, KISA was in trouble.
A seven-member, cross-cultural consortium 
was always going to be unwieldy,  
but when the Americans began to waver on the 
issue the West Germans and British did too.  
Neither government opted to 
loan money towards the project.
At the heart of the issue were divergent 
views between the World Bank and the South  
Korean government about the plant’s 
size. The Koreans wanted a very large  
steel-making plant capable of someday 
producing 1-2 million tons per year.
The World Bank felt that was too much. 
They did a feasibility study in 1966  
that asserted that the largest steel mill that 
the South Koreans can economically support was  
just 500,000 tons. 2 million tons of capacity 
threatened to tip over the global steel market.
Finally in November 1968, the World 
Bank officially declined a loan for  
KISA's steel mill. They recommended that 
the country pursue light industry instead.  
A steel mill was premature and not economically 
feasible. KISA dissolved a few months later.
By then, the South Korean economy was 
starting to gather steam. Thanks to  
several major construction projects, iron 
and steel consumption was growing rapidly  
and well ahead of projections 
- 15% year over year in 1967.
Without an integrated steel mill 
that can turn iron ore into pig iron,  
and then pig iron into finished steel, South 
Korea relied on small, privately-owned electric  
arc furnaces that melted down scrap steel. At 
about 10,000 tons each, these mills lacked scale.
Whatever shortfall had to be fulfilled with 
imports. In 1965, South Korea was only 61.3%  
self-sufficient in steel. Two years later 
in 1967, that ratio had worsened to 58.4%.
## Japan
With the West proving unreliable, 
Park Chung-hee turned eastward.
The United States government had long wanted their 
allies Japan and South Korea to make peace and  
normalize relations. It would help strengthen each 
other and shore up anti-Communist forces in Asia.
The growing Japanese economy also 
sought access to new markets,  
and the United States was not open to 
granting further access. The American  
diplomats positioned normalization as a way for 
Japan to develop a geographically close market.
This was never quite possible while 
Syngman Rhee - a former Korean  
independence activist - was in charge. 
The historical wounds left behind by  
the Japanese occupation were too fresh. 
Anti-Japanese sentiment, very strong.
Park Chung-hee was a different man - been educated  
in Japanese institutions and trained 
in their military. More importantly,  
he was pragmatic and ready to move on if that 
meant economic opportunities for his country.
Soon after taking power, Park Chung-hee entered 
normalization talks with Japan. And in 1965,  
they signed a treaty. As part of the 
reparations, the Japanese prepared some  
$500 million in grants and long-term loans 
to settle property and claims issues.
## Turning to Japan
When KISA began to fall apart in 
mid-1969, Park thought to use some  
of the Japanese reparations funds to build 
his long-desired integrated steel mill.
This was not as easy as it might seem. 
The agreements were already signed.  
The Japanese government initially declined 
to join KISA - generally agreeing with the  
westerners about the project's infeasibility.
To secure their agreement, Park Chung-hee 
pursued a two-track approach. First,  
direct government to government 
negotiations - which emphasized  
the value of a stronger South Korea as a 
deterrence against Communist aggression.
Meanwhile, TJ leveraged own personal 
ties to Japanese industry. Japan's  
three largest steelmakers quickly got on 
board. The main issue was the Japanese  
government - most of all its powerful Ministry 
of International Trade and Industry, MITI.
TJ met with MITI's minister Masayoshi 
Ohira, a future prime minister,  
and pressed the strategic importance of steel - 
evoking the history of Japan's own steel industry.
Including how Japan decided to build the 
massive Yawata Steel Works in the late  
1800s without concern to economic viability. It 
was simply a question of strategic necessity.
In August 1969, Korea's deputy 
prime minster announced that  
the Japanese changed their minds and 
were ready to back the steel project.
Yes, it was in part due to Park Chung-hee's 
determination and TJ's fervent lobbying.  
But it was also just smart business. 
KISA's collapse in early 1969 gave  
Japan the opportunity to lead the project 
without American or European interference.
And the home Japanese steel market 
was already oversupplied - with  
social repercussions regarding steel pollution 
issues. Exports to Korea can maintain sales of  
steel-making equipment without further 
exacerbating the domestic situation.
This in part explains why the Japanese 
steel companies were so in favor.  
The Koreans played on this, with 
one official quoted as saying:
> If you help us build a steel mill...  
your exports are guaranteed 
and you can sell [machinery]
And lastly, the Japanese government saw 
Park Chung-hee's determination to build  
his integrated steel mill - plus the country's 
skyrocketing steel demand - and realized that  
if they passed, then someone else (maybe 
zee Germans) would eventually step up.
## Negotiations
In November 1969, the two began 
negotiating on the cooperation details.
South Korea had earlier submitted a 
project proposal for a 1 million ton  
capacity integrated steel mill along with 
cost estimates and requests for technology.
Japan opened negotiations with a 64-page 
counter-proposal. They budgeted the mill to  
cost 25% more and require a year longer 
than what was in the Korean estimate.
They also declined Korea's request 
to transfer an advanced steel milling  
technology called "continuous casting". 
This game-changing technology lets a mill  
cast molten steel directly into finished 
shapes like sheets, wires, and rods.
Otherwise, the molten steel must be 
first cast into intermediate shapes like  
ingots or billets before reheating 
to produce the final shape - an  
energy-intensive process. The Japanese 
offered POSCO this older technology.
From November 19th to 21st, 1969, the two sides 
clashed. South Korea demanding the continuous  
casting technology as well as an accelerated 
construction schedule. The Japanese sticking  
to their conservative assessments. The 
arguments went late into the night.
Finally on the 21st, the two sides reached a 
compromise. The South Koreans agreed to Japan's  
delayed timeline; A middle number budget of $123 
million between Korea's $100 million and Japan's  
$131 million estimates; And the older slabbing 
technology for the main steel line. However,  
Japan did concede to include a 
smaller continuous casting unit.
The deal was signed in December 1969 between the 
South Koreans and Japan's Big Three steelmakers.  
Construction would begin in April 1970 
with anticipated completion in July 1973.
As work began, TJ made clear the enormity of 
their task. In June 1968 as preparatory work  
began on track and water infrastructure in 
Pohang, he gave a speech to his construction  
staff. A commonly cited quote - cleaned 
up but probably real - has him saying:
> "This steel mill is being built with the 
Korea–Japan claims settlement funds—the  
price paid in the blood of our ancestors. If we 
fail, it will be an unforgivable sin in history."
> "In that case, we should all march 
out of the construction site office,  
turn right, and throw ourselves into Yeongil Bay."
## Building POSCO
POSCO could not have existed 
without nation-state resources.
Like as in Japan, the South Korean central 
government built out POSCO's infrastructure.  
The Pohang local government evicted 
residents' land for the site. A special  
law was enacted so that energy and water can 
be provided to POSCO at discounted prices.
Despite that, TJ tried to run POSCO with as much 
autonomy as possible. And being the president's  
friend, he got that. But Park Chung-hee 
nevertheless remained deeply involved,  
visiting the Phase 1 site 13 times 
during the build between 1970 and 1973.
POSCO substantially leaned on the Japanese 
for Phase 1. The Korean engineers were  
asked to supervise and learn. But TJ did 
make efforts to find separate sources of  
coke and iron for POSCO - separate 
from the Japanese trading companies.
TJ also exercised some financial cunning by 
having the steel mill built "backwards". Usually,  
steel mills are built "forwards" - so from 
iron-making to casting to rolling into  
finished product. But that means the mill doesn't 
generate revenue until the whole thing is done.
POSCO was in need of immediate income. So 
TJ asked to build the Phase 1 facility the  
opposite way - from rolling to iron-making - so 
that POSCO can import semi-processed steel slab,  
and use that to make finished products to sell.
Workers pushed through brutal sandy wind 
conditions. They worked so hard that they were  
too tired to go back to their quarters to sleep 
and slept in the offices or on the roadsides.  
When the initial foundation fell behind 
schedule, TJ mobilized massive resources  
to correctly but quickly pour tens of 
thousands of tons of concrete to catch up.
Add in an unexpected shipbuilding boom that 
caused demand for plate steel to skyrocket.  
And the result was POSCO turning 
profits in its second full year,  
1970. Far ahead of expectation. 
 
## Student to Master
The rest of the Phase 1 build was 
completed on time in July 1973.
The three years it took outclasses the 
usual 4-9 years in other countries.
By then, Park Chung-hee's Heavy 
and Chemical Industries drive  
was in full effect - a powerful 
thrust to build up the country's  
military-industrial capacity 
to defend against North Korea.
Steel would be at the heart of all this. 
So President Park called to raise South  
Korean steel capacity from 1 million 
tons in 1973 to 10 million by 1980.
POSCO thus embarked on a massive expansion that 
added almost 6 million tons of steel over five  
years, phases 1 to 4. By then, the Koreans had 
been trained and taken over for the Japanese.
Throughout this, TJ navigated delicate 
geopolitics, domestic politics -  
Park Chung-hee was assassinated in 1979 - and 
a substantial steel market glut in the mid-70s.
After Phase 3 was completed, TJ again went to the  
aging president - a few hours before the 
latter's assassination apparently - and  
secured authorization to build a second 
mill next to Pohang - Gwangyang Steel.
Begun in 1982, the Gwangyang Steel mill 
adopted all the latest technologies - like  
the basic oxygen furnace, continuous 
casting, and computer control.
And by laying these units out in an innovative 
single line, Gwangyang's steel costs were 60%  
that of the average American steel mill. Good 
enough to start selling into the Japanese  
market and compete with the Japanese steel 
giants. The student had now become the master.
## Conclusion
Today, POSCO is one of the world's most 
efficient and advanced steel companies.
Measured by pure steel production in 2024,  
the company is eighth place. One of the 
few non-mainland Chinese producers to  
rank in the top ten. And they rank 
very highly in terms of efficiency.
They also have a large geographical footprint. 
Particularly the Mainland Chinese market,  
which they entered in the 1990s 
with great benefit. China to this  
day remains one of their top export destinations.
Few steel companies have an origin story 
so deeply intertwined with their country's  
rise from poverty. South Korea went 
to the limit to get the chance to  
build their integrated steel mill. And 
the men and women of POSCO responded.

Apr 25, 2026

Watch Read Summary

What DeleteMe and Incogni aren't telling you

Reject Convenience

Heimler's History

May 01, 2026

Watch Read Summary

PDF

Expertise and Capital

TJ Park and Pohang

KISA Collapse and Japanese Partnership

Building POSCO

Mechanisms & Explanations

Outcomes

Takeaways

Frequently Asked Questions

Why did POSCO use a backward construction strategy?

How did Japan’s reparations influence POSCO’s financing?

Who is Asianometry on YouTube?

Does this page include the full transcript of the video?

Helpful resources related to this video

Share This Summary

Embed This Summary