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Hyundai Steel Seeks to Fly on Wings of Steel |
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administrator |
DATE |
2008-12-01 11:12:00 |
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Hyundai Steel Seeks to Fly on Wings of Steel
By Jane Han, Staff Reporter
The southwestern coastal city of Dangjin has been bustling with action lately, with Hyundai Steel's first-ever integrated blast furnace well on its way toward completion.
Following ground breaking in October 2006, the nation's third integrated steel mill, housing two blast furnaces, will be completed for production in 2010. Once finished, the plant ― about 42 stories high ― will churn out a total of 8 million tons of steel products annually. This is enough steel to make 8 million automobiles.
All of this is a long-cherished accomplishment for Chung Mong-koo, the chairman of Hyundai-Kia Automotive Group, the parent company of the country's second-largest steel maker. Building an integrated steel mill has been known as a long-time dream for the Hyundai family, since the days of late Hyundai founder Chung Ju-yung.
The conglomerate's first attempt was made in 1977, again in 1994, 1996 and 1997, all of which were unsuccessful due to difficult economic conditions and the vast amounts of money needed.
``We're expecting that Hyundai's steelworks will help boost the competitiveness of the local steel sector and other major industries like shipbuilding,'' said Chung at the groundbreaking ceremony at the port city.
South Korea's per-capita steel consumption is among the highest in the world, as the country's leading shipbuilding, automobile and electronics industries grow steadily, according to the Korea Iron and Steel Association.
Hyundai-Kia Group, which owns the nation's two largest carmakers, is going to be one of the key beneficiaries of the mill, as its production will secure a stable supply of steel for auto manufacturing.
Hyundai Steel said it plans to invest about 5 trillion won until 2011 to seat itself as the world's sixth-largest steel maker.
Farewell to POSCO's Monopoly
Since its inception in 1972, POSCO has enjoyed a near monopolistic status on the domestic front as it supplies more than 40 percent of South Korea's steel demand. But because the world's No. 4 steel maker has been the only owner of a blast furnace, the remaining need was met via imports.
Industry data shows that local steel makers have imported about 5 million tons of hot-rolled steel plates to produce cold-rolled steel plates every year. Cold-rolled steel sheets are used to make cars.
Eyeing opportunity from growing shortage problems, Chung outwardly showed his intentions of building a blast furnace back in 2004, after Hyundai Steel took over the Dangjin facility from now-defunct Hanbo Iron & Steel. Hyundai Steel is currently only equipped with electric furnaces that produce 11 million tons of steel annually, using scrap metal.
Like Hyundai Steel, none of the other local makers are equipped with an ``integrated steel mill.'' They usually make finished products by melting hot coils and slabs in the electric furnaces, instead of burning iron ore and coal.
At a time when POSCO plans to increase automotive steel sales this year, Hyundai Steel's blast furnace will soon enable them to churn out similar products, thereby putting them up to speed with its rival.
The No. 2 player said it plans to additionally build a third blast furnace by 2015, which will increase its total annual production capacity to 12 million tons. But the specific groundbreaking date has not been set yet.
Industry sources say that Hyundai's steel mill is welcomed in many ways because South Korea is suffering a chronic shortage of steel products because it lacks blast furnace facilities.
A recent Daeshin Securities report estimates, though, that the ongoing expansion projects by POSCO, Hyundai Steel and Dongkuk Steel will help relieve the imbalance to some degree.
Battle for Raw Materials
There's a downside to operating a blast furnace. It needs iron ore, which is at an all-time high demand worldwide.
Iron ore prices have more than tripled over the past five years and is expected to surge another 65 to 70 percent this year, according to analysts. Prices for coking coal, another essential ingredient to make steel, are likely to double, as well.
Hyundai Steel has so far sealed a long-term contract with Rio Tinto Group, under which the mining group will supply more than 40 million tons of iron ore to the steel maker over the next decade.
It has also agreed with BHP Billiton to import iron ore and soft coal for 10 years, starting 2010. Along with BHP and Rio, CVRD and Canada's EVCC will together supply Hyundai Steel with 15 million tons of iron ore and 6 million tons of soft coal, which is almost 100 percent of Hyundai Steel's needs.
In terms of technology, the steel maker formed an alliance with Germany's Thyssen Krupp for technology transfer on blast furnace and automotive steel sheets. The tie-up is set to allow Hyundai Steel obtain overall operational know-how.
Thyssen Krupp is the world's 12th-largest steel maker and a supplier of automotive steel sheets to BMW.
Giving Back Already
A total of 93,000 new jobs is to be generated during the course of the construction, and the inducement effects is expected to be around 13 trillion won. Hyundai Steel adds that the major industrial project will help to drive regional growth, making Dangjin the second-largest iron and steel-manufacturing base in the country. Dangjin County forecasts that Hyundai Steel's initiative will add on nearly 70,000 citizens over the next three to four years.
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