By Park Si-soo
Hyundai Steel acquired its sister company Hyundai Hysco, Wednesday, making it one of the world’s 10 largest steelmakers and posing a challenge to POSCO’s domestic leadership.
The merged entity is capable of producing 30 million tons of steel products annually and has eleven coil centers in eight countries. Its combined assets and sales amount to 31 trillion won ($27.78 billion) and 20 trillion won ($17.91 billion), respectively.
Officials said the company will step up efforts to product high-end lightweight automotive steel products to maximize synergy with its parent company, Hyundai Motor.
“Through this merger, we will diversify our business portfolio, while at the same time enhancing business competitiveness by expanding the export portion through overseas coil centers owned by Hyundai Hysco,” a Hyundai Steel spokeswoman said. “We also expect to run our business on more stable footing by improving management efficiency based on a unified system for the whole process ranging from securing raw materials to selling final products.”
Experts said the merger will facilitate Hyundai Steel’s overseas expansion using eleven Hysco-owned coil centers in eight countries ― the United States, China, Turkey, Brazil, India, Russia, the Czech Republic and Slovakia. A 12th center is under construction in Mexico. The firm plans to build the 13th in Chongqing, China in the near future.
At the same time, the company is expected to face increasing pressure to diversify its customers.
The company has shown impressive performances in recent years, even outperforming POSCO in terms of operating profit margin in the first quarter of 2015. Yet experts believe this was largely attributable to the performance of Hyundai Motor and Kia Motors. They said a major portion of the steelmaker’s sales had been generated by selling products to the two carmakers and other Hyundai-branded companies. It means the firm’s profitability depends largely on a handful of companies.
Many experts have advised Hyundai Steel to diversify its customer base, otherwise it could face difficulty in achieving stable growth.
Reports say that Hyundai Motor is suffering from declining sales at home and abroad due to the depreciated Japanese yen and brisk sales of imported cars here.
“Hyundai’s sales slipped in major automotive markets including the United States and China, while its rivals have shown a better performance on the back of a global automotive market recovery and favorable currency exchange rates,” said Ko Tae-bong, senior analyst at HI Investment and Securities.
Hyundai Motor is working to expand sales in the Chinese market. It recently unveiled an ambitious plan of building its fourth and fifth factories in Changzhou and Chongqing.
Hyundai Steel and Hyundai Hysco reported 16.8 trillion won and 4.2 trillion won in sales, respectively, last year, with their combined assets topping 31 trillion won.