Steelmaker POSCO’s (NYSE: PKX) advantage over its rivals is three-fold. First, demand for steel in its home market of South Korea–which it dominates–is robust, as that country builds out productive capacity and its cities grow. The company continues to run its factories at 100 percent of capacity, with no plans to shut down any production.

POSCO’s second advantage is being part of a chaebol–a dominant South Korean conglomerate–that includes a power generation company and parent company with deep pockets and extensive government contacts. Synergies between the various parts of the greater company have held down electric power costs that are a huge part of steel production costs. Government connections hold immense benefits in keeping labor relations steady, blunting another potential threat to controlling costs in a tough environment.

The company’s third competitive advantage is a growing ability to produce its own inputs, thanks to an effort to expand global holdings of natural resources, particularly of metallurgical coal. The company has raised its self-sufficiency in this key input to 31.9 percent of its needs. That’s up 3.6 percentage points over the past year and should continue to rise. Rising self-sufficiency translates into a huge cost advantage over major rivals, which must purchase in an increasingly choppy and competitive global market.

POSCO isn’t wholly immune from the weakness in the current economic environment. Speaking at the company’s third-quarter conference call, senior vice president for finance Tong-Wook Shim sounded a cautionary note. He said the fourth quarter would bring some severe challenges and generally steered clear of any statements that would indicate a near-term boost in earnings growth.

The flip side of that is that low expectations are far easier to beat than lofty ones. And with POSCO shares down some 25 percent this year, this caution is definitely built into the stock–few are paying up for the company’s superior long-run potential in what’s still a rapidly growing and essential industry.

The newest addition to the Metals and Mining Portfolio, POSCO is a strong buy up to USD90 for those who can handle some near-term volatility in pursuit of big returns.

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