POHANG, South Korea (AP) _ While steel industries elsewhere are in a slump, a plant runs around the clock on land reclaimed from the sea at this old fishing village, turning out low-cost steel that helps make South Korean goods a bargain on world markets.

Pohang Iron and Steel Co., Ltd., or POSCO, is riding a home-grown boom in other Korean industries such as autos, electronics and shipbuilding.

The surge in Korean industry, which brought the nation its first trade surplus last year, helped POSCO earn a profit of $71.6 million in 1986.

''The domestic demand for steel has gone up dramatically, thanks to exports of autos and the home appliance sector,'' says Lee Sun-koo, POSCO's director of exports.

The steelmaker grew in Pohang, 250 miles southeast of Seoul, over the last 19 years. Today its products account for 40 percent of South Korea's steel exports, and its crude steel production of 9.53 million tons last year was 1.3 percent of world output.

POSCO, owned 33 percent by the government and 64 percent by several banks, employs 19,000 people and its Pohang plant, built mainly on reclaimed land, has been the world's largest single-unit steel producer since 1982.

POSCO also is opening another plant, the Kwangyang Steel Works, on 2,434 acres of reclaimed land 170 miles southwest of Pohang and will produce 5.4 million tons of steel annually when it is completed next year. Combined with Pohang Steel Works' output, POSCO will be second in the world only to Japan's Nippon Steel.

It is one of the prides of Korean industry - and practically a state secret, with police guarding its entrances.

POSCO dominates Pohang, now a city of 80,000 with virtually no other industry. Aside from 15,000 POSCO employees - 4,000 others are already at Kwangyang - POSCO provides the lifeblood to 83 companies employing 14,000 people in machinery and steel products manufacturing, and to 25 cooperative firms employing 13,000 that deal exclusively with POSCO.

South Korea's voracious internal demand dominates POSCO's strategy to the extent that little of the additional production from Kwangyang is likely to be exported.

''Our expansion is primarily aimed at the domestic market, and that is justified by ever-increasing domestic demand,'' export director Lee said in an interview. ''We will export some to earn foreign currency to pay off loans and import raw materials.''

Korean steel exports are likely to remain static this year, says Kim Sung- woo of the Korea Iron and Steel Association.

''Domestic production of cold rolled sheet, wire lot and stainless steel sheeting are far from meeting Korean needs,'' Kim said. ''POSCO can provide much of these to Korean consumers.''

Foreign competitors complain that POSCO undercuts them by paying low wages and by ''dumping'' - selling at less than production cost.

POSCO dismisses the criticism, maintaining that its initial investment scheme and hard-working staff have made it foremost among South Korea's 200 steel companies.

''Our competitiveness comes from our high productivity and low-cost initial investment in our plants - less than half the world standard,'' Lee said. ''We are the lowest-cost producer in the world.''

POSCO's average hourly wage is $6, compared with $16 in Japan and $20 in the United States.

''By Korean standards our wages are on a high level,'' Lee said. ''In Korea the cost of living is much, much lower than European countries, the U.S. or Japan.''

Special housing for employees, schools and training institutes, and sports and entertainment facilities are among other POSCO benefits.

Choi Hwang-bum planned to be a teacher after leaving the army but came to work at Pohang instead 10 years ago.

''My job is like my family,'' he said. ''My working hours are an important part of my life. It is impossible to separate POSCO from me.''

He is a craftsman at the 2nd Hot Rolling Department of the company's No. 1 Wire Rod Mill and earns 500,000 won ($609) a month, with a bonus of 2 million won ($2,440) a year. He lives with his wife and three children in a two- bedroom apartment he bought for 10 million won ($12,000) in 1981. He commutes 30 minutes by train or bus to work.

He works in a blue jumpsuit with the POSCO insignia and a badge that says, ''Three bests: quality, cost, production. Three zeroes: accidents, defects, waste.''

Choi works alternating eight-hour morning, afternoon or overnight shifts and gets three days in a row off each month.

He studies Japanese because many technical manuals come from Japan.

''Of course, Japanese steel companies are now ahead of POSCO but someday we'll be apace with them,'' he said.

''I like my job, I love my mills. You couldn't take me away from them.''

The South Korean steel industry has fewer people, and higher morale, said Junichi Iwade, a manager at Japan's Nippon Steel, which recently decided to close five blast furnaces and lay off 19,000 workers because of the global slump.

''Japanese steel is also suffering from the high yen,'' Iwade added.

The steel association's Kim said Japan has lost its long-time dominance in steel because the yen's sharp rise has made Japanese steel more expensive, and Japan's market share ''is largely being transferred to Korea.''

But POSCO sees the yen's strength as a mixed blessing.

''If you look just at exports as a result of the high yen, Japanese mills have raised their prices, and to a certain extent we benefit,'' Lee said. ''But as our company has a lot of foreign loans in Japanese yen and Deutsche (West German) marks, that naturally increases our burden in repayment.''

POSCO's exports are also down because of falling oil prices and import quotas in the United States, Europe, Australia and Canada. ''This kind of protectionism prevents any free trade in steel products, and prevents any natural market-oriented system,'' Lee contended. ''It will only give (those countries) a momentary boost for a short period.''

But he remains upbeat about business, and says POSCO will strive to increase productivity and develop new technologies.

''That effort will be never ending,'' Lee said, ''because if we are lazy, other steel mills might catch up.''

End Adv for Sunday June 7