A report has created a stir over the Chuseok holiday by proposing that three out of the country's seven steel plants producing thick plates be shut down ― one this year and two others gradually.
The report, prepared by Boston Consulting Group at the request of the Korea Iron & Steel Association, called for cutting the annual output of thick plates by 4 to 5 million tons from the current 12 million tons being manufactured. This means that one of the three leading steel companies ― POSCO, Hyundai Steel and Dongkuk Steel Mill ― might have to give up producing thick plates needed mainly to make vessels and offshore plants. Currently, POSCO is running four thick plate plants, Hyundai two and Dongkuk one.
The report expects the shipbuilding industry to suffer a prolonged slump amid the continuing influx of China's cheap steel products. Domestic demand for thick plates was forecast to fall from 9.2 million tons last year to 7 million tons in 2020.
Steel companies reacted angrily, saying the report judged the situation too absurdly and rashly. "Such a judgment comes from the current dire state of the steel industry. But if the economy picks up, demand for thick plates will rebound," a POSCO official was quoted as saying by a local news agency. Closing domestic facilities is also feared to deepen the erosion of local markets by Chinese steelmakers rather than contribute to easing the oversupply.
Preemptive restructuring of the steel industry will be painful amid expectations that more than 1,000 workers could be trimmed. But the government should learn lessons from the seemingly failed restructuring of our shipbuilding and shipping industries.
Nearly 7 trillion won in taxpayer money has been spent on shoring up Daewoo Shipbuilding and Marine Engineering, but it's hard to guarantee its revival. Hanjin Shipping, the world's seventh-largest shipper, fell under court receivership after all, causing global turmoil in sea transport.
Needless to say, corporate restructuring should comply with market principles and the government ought to minimize its intervention. But it's almost certain that a considerable number of steelmakers would face a crisis in a year or two should the current situation remain.
The government reportedly plans to unveil its final restructuring report after gathering opinions from every part of society. It's imperative then that the government come up with elaborate restructuring measures that won't cause a repeat of the fiascos happening in shipbuilding and shipping.
What is urgently needed is to encourage steelmakers to embark on restructuring voluntarily. The government should also spare no effort in helping them develop cutting-edge products.
The report, prepared by Boston Consulting Group at the request of the Korea Iron & Steel Association, called for cutting the annual output of thick plates by 4 to 5 million tons from the current 12 million tons being manufactured. This means that one of the three leading steel companies ― POSCO, Hyundai Steel and Dongkuk Steel Mill ― might have to give up producing thick plates needed mainly to make vessels and offshore plants. Currently, POSCO is running four thick plate plants, Hyundai two and Dongkuk one.
The report expects the shipbuilding industry to suffer a prolonged slump amid the continuing influx of China's cheap steel products. Domestic demand for thick plates was forecast to fall from 9.2 million tons last year to 7 million tons in 2020.
Steel companies reacted angrily, saying the report judged the situation too absurdly and rashly. "Such a judgment comes from the current dire state of the steel industry. But if the economy picks up, demand for thick plates will rebound," a POSCO official was quoted as saying by a local news agency. Closing domestic facilities is also feared to deepen the erosion of local markets by Chinese steelmakers rather than contribute to easing the oversupply.
Preemptive restructuring of the steel industry will be painful amid expectations that more than 1,000 workers could be trimmed. But the government should learn lessons from the seemingly failed restructuring of our shipbuilding and shipping industries.
Nearly 7 trillion won in taxpayer money has been spent on shoring up Daewoo Shipbuilding and Marine Engineering, but it's hard to guarantee its revival. Hanjin Shipping, the world's seventh-largest shipper, fell under court receivership after all, causing global turmoil in sea transport.
Needless to say, corporate restructuring should comply with market principles and the government ought to minimize its intervention. But it's almost certain that a considerable number of steelmakers would face a crisis in a year or two should the current situation remain.
The government reportedly plans to unveil its final restructuring report after gathering opinions from every part of society. It's imperative then that the government come up with elaborate restructuring measures that won't cause a repeat of the fiascos happening in shipbuilding and shipping.
What is urgently needed is to encourage steelmakers to embark on restructuring voluntarily. The government should also spare no effort in helping them develop cutting-edge products.
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