Posco (NYSE:PKX), South Korea's largest steelmaker and the fifth largest in the world, announced its fourth-quarter and full-year earnings on Friday. In keeping with the news from other steelmakers around the globe, from Mittal (NYSE:MT) in the Netherlands to America's U.S. Steel (NYSE:X), Posco did very well.

For the quarter, profits came in at $1.14 billion -- up 155% from the same quarter the previous year and 18% higher than analysts estimated. Amazingly, Q4 profits were also up 30% sequentially over Q3's $875 million profit. For the year, Posco's performance was similarly impressive: Sales rose 38%, and profits were up 93%, to $3.67 billion.

Unlike in the previous quarter, when the company likewise crushed estimates, the market gave Posco some credit for its achievement this time. Three months ago, after beating analyst estimates by 18%, Posco suffered a 0.5% drop in its stock price, but on Friday, the market grudgingly decided that a repeat victory by the same margin merited a 1.5% rise.

Company management attributed its success this year in large part to two things: (1) a better product mix, allowing greater margins and including more of the steel plate used in the auto industry; and (2) sales to China. As we've noted previously, there's a genuine need for steel plate right next door in Japan, where automakers Suzuki (OTC BB: SZKMF) and Nissan (NASDAQ:NSANY) have both been forced to cut production on several occasions, because of a deficit of steel. But above the Korean peninsula, China's economic boom continues, and the growing market there likely encouraged Posco to form its announced plans to boost its steel production capacity by another 12.5% over the next three years -- en route to the company's aim of becoming the world's No. 3 steelmaker.

As long as China's economy and the world's bull market in steel continue, Posco's goal seems reasonable. It has two hot markets right at its doorstep. But should China's boat slow, or if the Chinese economy goes cold and begins flooding the global markets with cheap steel -- as some analysts are predicting is imminent -- Posco could be first in line to feel the effects.

In addition to being the world's fifth-largest steelmaker, Posco is, by some measures, the No. 1 cheapest steel that stock money can buy. Read all about it and find out why "Korea Doesn't Feel the Love."

Fool contributor Rich Smith has no position in any of the companies mentioned in this article.