Hysco shines in industry slump
Hyundai Motor affiliate benefits from booming auto industry
By Lee Hyo-sik
POSCO and other local steelmakers have been struggling to cope with high prices of iron ore and other raw materials and the global oversupply of steel over the past year. Falling demand for various steel products as a result of the European debt crisis and the slowing Chinese economy has also wreaked havoc on steelmakers.
However, Hyundai Hysco, an affiliate of Hyundai Motor Group producing mostly automotive steel plates, has been an exception to this prevailing trend. The mid-sized steelmaker has remained largely unscathed from the ongoing steel industry slump on the back of the booming automobile industry here.
The company saw its revenue jump 10 percent to 4.33 trillion won in the first six months of this year from the previous one, with its operating income jumping 4 percent to 238.3 billion won over the one-year period.
In contrast, POSCO, the world’s third largest steelmaker, earned 32.8 trillion won in the first half, down from 33.3 trillion won the same period last year. Its operating profit fell sharply to 1.85 trillion won from 3.1 trillion.
Hyundai Steel, Korea’s second largest steelmaker also saw its sales inch down to 7.4 trillion won from 7.6 trillion, with its operating income plunging to 491 billion won from 724.5 billion.
Analysts say that Hyundai Hysco has benefited greatly from soaring demand for automotive steel sheets from Hyundai Motor, Kia Motors and other carmakers.
“Thanks to the booming automobile industry, the steelmaker has been able to remain largely unharmed from the current steel industry downturn,’’ said Aum Jin-seok, an analyst at Kyobo Securities. “The firm has sold a record volume of automotive steel plates to Hyundai and Kia.’’
Hyundai Motor sold a record number of vehicles across the globe, earning 21.9 trillion won in the first half of this year, while its sister firm Kia making 12.56 trillion won. Hyundai Hysco earned 644.6 billion won in the first half, up 28 percent from a year earlier, from dealings with the two carmakers and other group affiliates.
The firm buys hot-rolled steel plates from Hyundai Steel and other steelmakers operating a furnace. It then processes hot-rolled steel sheets into cold-rolled ones, which can be used for cars and other industrial products.
“Additionally, the falling prices of hot-rolled steel plates as a result of the supply glut have benefited Hyundai Hysco over the past year. An influx of low-priced steel sheets from China has slashed market prices,’’ Aum said.
Hyundai Hysco paid an average of 880,000 won per ton in the first six months of this year, down from 900,000 won from the previous one.
The analyst projected that the company will perform even better for the remainder of 2012. “Thanks to robust steel demand from Hyundai and Kia, Hysco will make more money in the second half. The firm plans to boost its production capacity by 700,000 tons before the year’s end, which will significantly boost its sales next year.’’
Aum then said POSCO and Hyundai Steel will continue to struggle through the fourth quarter of this year, due to the stagnant steel demand across the globe.
But he expects the companies will perform better from the first quarter of 2013, thanks to cheaper iron ore and other commodities and a global economic rebound.