Hyundai Steel leads industry-wide shift to green
Its Dangjin mill opens up eco-friendly era
By Kim Tae-gyu
Korea Times correspondent
DANGJIN ― The last industry that has anything to do with "green" would appear to be the steel businesses because they have been constantly accused of damaging the environment while cranking out irons or steel.
But this is not the case for Hyundai Steel, which has established an eco-friendly blast furnace in Dangjin, South Chungcheong Province, designed to substantially reduce any pollutants.
In particular, it sealed 35 kilometers of conveyor belts so that raw materials on the move from seaports to storage do not cause environmental problems ― they are not airtight but strong enough to prevent any leaks.
"Thus far, steel mills have been responsible for releasing various pollutants but there have been few solutions with existing facilities," Hyundai Steel spokesman Lee Seung-hee said.
"Accordingly, we came up with the idea of sealing all the conveyor belts as well as storage facilities for the first time among major steel makers across the world at huge cost."
Hyundai Steel, a unit of the Hyundai-Kia Automotive Group, spent 400 billion won for the out-of-the-box idea of sealing the conveyor belts, a substantial part of its total 6.2 trillion won to build a blast furnace and related infrastructure in Dangjin.
However, the company believes that the large investment will eventually benefit the Incheon-based firm.
"Some raw materials are lost in transit on open-air conveyors or while storing them at yards. Our facilities can help minimize the losses to increase our competitiveness in the long run," Lee said.
"Plus, we can be free from environmental disputes. As many foreign businessmen have evaluated the facilities as impressive, we may be able to offer consulting services or export the platform."
Iron and steel manufacturers have come under fire for the emission of harmful nitrous oxide and arsenic acid dust generated mostly in the procedure of unloading, transferring and storing raw materials.
When iron ore and coking coal are kept in open-air storages, they end up causing pollution due to wind.
In addition, Hyundai Steel funneled 130 billion won more to build eco-friendly mills including self-sufficient generators, which produce 2.67 million megawatts of electricity a year.
Saving energy
The four turbine generators use gases such as coke oven gas, blast furnace gas and ladle gas over the steel-making process to provide about 80 percent of the power needed to run the Dangjin plant.
By recycling byproduct gases to create power, Hyundai Steel cuts down on the emission of carbon dioxide by 1.5 million tons a year.
"We have channeled some 8.5 percent of our overall investment into green infrastructure. This is very high compared to other mills even in advanced economies not to mention of those in developing countries," Lee said.
"We will continue to put forth further efforts in order to evolve the Dangjin mills to become green factories envied by other players."
Experts point out that Hyundai Steel has taken the right direction ― in a contributed article to The Korea Times, the Boston Consulting Group (BCG) said that the shift to the eco-friendliness is inevitable in the steel industry down the road.
"For many, managing for environmental sustainability is no longer merely an option but an imperative," BCG project leader Ko Young-suk said. "Volatile ― and, in the long-term, rising ― prices for energy and resources, together with tightening environment regulations, will affect steel makers' competitive positions."
Bright prospects
Hyundai Steel thinks that the Dangjin plant, built on 7.4 square kilometers of reclaimed ground about 90 kilometers south of Seoul, will boost the company's future prospects.
First of all, the steel maker claims that Dangjin is at the heart of South Korea where both the marine and land transportations are very convenient.
"Most domestic steel mills are located in remote areas at the corners of the nation, thus raising their logistics expenses. In comparison, Dangjin is at the center of the country to offer cost competitiveness," Lee said.
"Dangjin is the only place on the West Sea where large vessels of more than 200,000 tons can dock. See why other steel makers are selecting Dangjin where up to 200 start-ups sprout up every year."
A few other local steel manufacturers such as Dongkuk Steel and Dongbu Steel also have their production lines there.
Hyundai Steel expects that the new blast furnace with an annual capacity of 4 million tons will help jack up its annual turnover to 9.2 trillion won this year, up 15.3 percent from a year before.
The upward trend is expected to gain a fresh momentum late this year when another blast furnace will start cranking out steel with the same capacity. Hyundai is thinking of adding a third one in 2015.
Economies of scope
Observers point out that the blast furnaces would bring economies of scope to the Hyundai-Kia Automotive Group, whose flagship affiliates of Hyundai Motor and Kia Motors combined to rise to the world's No. 6 last year.
Economies of scope refer to efficiencies associated with different types of products that are related to one another.
Hyundai Steel contends that economies of scope will be applied to the group thanks to its unique business portfolio.
"Hyundai Steel produces iron and steel, which will be finely cold-rolled by Hyundai Hysco so that Hyundai Motor and Kia Motors can produce vehicles with them. When the cars retire, they would create steel scrap, offering raw materials for Hyundai Steel's electric arc furnaces," Lee said.
An electric arc furnace is a furnace that melts scrap metal with an electric arc to come up with second-tier steel products while a blast furnace is one that making first-rate steel products from iron ore.
There is another benefit for the country's second-largest conglomerate to enjoy.
Thus far, Hyundai Motor and Kia Motors have depended on steel from POSCO, the world's fourth-largest player, to secure high-quality steel to build vehicles because Hyundai Steel could not produce it with its electric arc furnaces.