U.S. News

Warren Buffett's Berkshire Owns 4% Stake in POSCO


POSCO surged on Friday after U.S. investor Warren Buffett's firm Berkshire Hathaway said it owned a 4% stake in the South Korean steel maker as of the end of 2006.

Berkshire owned 3.5 million shares in POSCO , the world's third-biggest steel maker, as of Dec. 31, 2006, Buffett wrote to shareholders in a letter out on Thursday.

The world's second-richest person after Bill Gates did not comment on POSCO directly, just listing the steel maker among the global companies in which Berkshire has made common investments.

The Oracle of Omaha, as Buffett is known, stands to make a tidy profit on his investment which he bought for $572 million. The stake was worth 1.23 trillion won ($1.31 billion) as of its Wednesday's closing share price, despite having slumped 5% that day as part of a rout of global stock markets.

South Korean public markets were closed on Thursday for a public holiday. An official at POSCO told Reuters it did not know when Berkshire bought shares in its company.

POSCO shares have surged 75% since the beginning of 2006 to Wednesday's close, far outperforming the Kospi Index's 2.8% gain during that period.

Analysts have attributed the rally to expectations for further consolidation in the global steel sector, after Mittal Steel in 2006 took over rival Arcelor in a deal worth around $33 billion.

Fundamentals have also played a role in POSCO's surge, with the steelmaker posting its first profit growth in a year in 2006, and with analysts forecasting earnings to improve this year amid rising steel prices and improved efficiency.

Japan's top two steelmakers Nippon and JFE Holdings on Thursday raised their full-year profit forecasts on continued strong demand for high-end steel, which also provides the bulk of profits at POSCO.

The South Korean steel maker also signed last year a contract to build a $12 billion integrated steel complex in Orissa, located on India's east cost, marking the largest single foreign investment in the emerging economic giant.