By Jane Han
Staff Reporter
A little more than two years after breaking ground, Hyundai Steel is coasting toward erecting its first-ever integrated steel mill, feeding a more stable and cheap supply to parent Hyundai Motor ― and breaking POSCO's monopoly in the local market.
Targeting annual production of 4 million tons by next year and 8 million tons by 2011, the country's second-largest steel firm's capacity, at first glace, is tiny compared to rival POSCO's 33 million tons.
However, experts say there is more behind the numbers.
``Hyundai Steel is going to fall far behind POSCO in terms of production and quality at first, but the significance is that Hyundai's crude steel production is actually going to prompt competition in the market,'' said Cho In-jae, an analyst at KB Investment & Securities.
POSCO, which sells 70 percent of its production here and 30 percent overseas, is the only steel firm in Korea that operates an integrated steel mill with a blast furnace. Other makers produce finished products by melting hot coils and slabs in electric furnaces, instead of burning iron ore and coal.
The lack of blast furnace facilities has led to a chronic shortage of steel here, which has consequently forced domestic industrial manufacturers to import an annual 26 million to 29 million tons of steel per year, according to the Korea Iron & Steel Association.
Yang Ki-in, analyst of Daewoo Securities, said POSCO's near monopolistic status is going to fade as its committed clients and manufacturing giants, such as Hyundai Motor and Hyundai Heavy Industries, are more than likely to shift their supplier.
Currently, POSCO is a primary supplier of steel products for Hyundai Heavy Industries, the world's No. 1 shipbuilder, and Hyundai-Kia Automotive Group, the world's fifth largest carmaker.
``Our main goal is to fulfill our own steel needs,'' said Hyundai Steel spokesman Park Chun-tak, who explained that of Hyundai's 8-million-ton production, 6.5 million tons will be used to make steel sheets for automobiles. Eight million tons of steel is enough to make eight million cars.
Although this isn't good news for POSCO, which has been ramping up its automotive steel sheet business with value-added products, company officials downplayed Hyundai's threat.
``Hyundai is just one of many of our customers, so even if we lose their business, it isn't going to deal a huge blow,'' said POSCO spokesman Kim Dong-wan, who stressed that the steel maker's production capacity is limited.
But the up and coming rival hinted that it would continue to beef up its production for a larger piece of the market, beyond supplying its own needs.
After seeing progress from its first and second blast furnaces, Hyundai says it plans to build a third one by 2015, increasing the total annual production capacity to 12 million tons.
``Our goal isn't to steal POSCO's position, but we are going to try to get up to speed with the market leader,'' said Park.