By Park Si-soo
Hyundai Steel was selected as the preferred bidder to take over a special steel-making affiliate of debt-ridden Dongbu Group, the company said Friday.
This bidding, if completed successfully, will deal a severe blow to the country's leading specialty steel maker SeAh Group that is trying to acquire POSCO Specialty Steel in an ambitious move to cement its position as the dominant supplier of special steel in the country.
It's uncertain how much Hyundai bet to win in a two-way race with SeAh. Rumors have it that the steel making affiliate of Hyundai Motor wants to buy Dongbu Special Steel for 260-300 billion won ($245-283 million).
Dongbu Special Steel can produce up to 400,000 tons of specialty steel annually. Hyundai is currently building a large-scale special steel plant in Dangjin, South Chungcheong Province, which will produce up to 1 million tons of specialty steel ㅡ 600,000 tons of steel bars and 400,000 tons of wire rods ㅡ starting 2016. SeAh's capacity is 3.4 million tons.
"The specialty steel market has long been controlled by a handful of suppliers. Therefore, our purchase of Dongbu Special Steel will ensure a more level playing field for other suppliers and bolster the market's competitiveness as a whole," Hyundai said in a statement, Friday. "It will be also helpful in bolstering the competitiveness of the country's auto industry."
Hyundai Motor is one of the biggest consumers of homemade specialty steel products. A Hyundai Steel official said the successful completion of the bidding will ensure "easier development and supply of high-quality specialty steel products suitable for making cars."
SeAh said it had done everything it could so it "feels no regret for the failed bidding" in a statement released following Hyundai's announcement.
"What's worrisome is that Hyundai's purchase (of Dongbu) may disrupt the ecosystem of the specialty steel market," an industry insider said. "I don't rule out the possibility that Hyundai Steel will press smaller specialty steel makers to use its basic steel products by taking advantage of Hyundai Motor's buying power."
Dongbu Special Steel is known to have bought 300,000-400,000 tons of steel coils from POSCO annually. But industry insiders say under Hyundai's control, it seems predictable that Dongbu will stop or at least reduce the amount of steel coil it purchases from POSCO.
Shares of Hyundai Steel slipped 1.76 percent or 1,200 won to close at 66,800 won, Friday. The benchmark KOSPI closed at 1,925.69, down 5.96, or 0.31 percent.
"It will have limited impact on Hyundai Steel's credit rating considering its cash reserves," said NICE Investors Service. As of June, Hyundai Steel has more than one trillion won deposited in bank accounts.
Hyundai Steel was selected as the preferred bidder to take over a special steel-making affiliate of debt-ridden Dongbu Group, the company said Friday.
This bidding, if completed successfully, will deal a severe blow to the country's leading specialty steel maker SeAh Group that is trying to acquire POSCO Specialty Steel in an ambitious move to cement its position as the dominant supplier of special steel in the country.
It's uncertain how much Hyundai bet to win in a two-way race with SeAh. Rumors have it that the steel making affiliate of Hyundai Motor wants to buy Dongbu Special Steel for 260-300 billion won ($245-283 million).
Dongbu Special Steel can produce up to 400,000 tons of specialty steel annually. Hyundai is currently building a large-scale special steel plant in Dangjin, South Chungcheong Province, which will produce up to 1 million tons of specialty steel ㅡ 600,000 tons of steel bars and 400,000 tons of wire rods ㅡ starting 2016. SeAh's capacity is 3.4 million tons.
"The specialty steel market has long been controlled by a handful of suppliers. Therefore, our purchase of Dongbu Special Steel will ensure a more level playing field for other suppliers and bolster the market's competitiveness as a whole," Hyundai said in a statement, Friday. "It will be also helpful in bolstering the competitiveness of the country's auto industry."
Hyundai Motor is one of the biggest consumers of homemade specialty steel products. A Hyundai Steel official said the successful completion of the bidding will ensure "easier development and supply of high-quality specialty steel products suitable for making cars."
SeAh said it had done everything it could so it "feels no regret for the failed bidding" in a statement released following Hyundai's announcement.
"What's worrisome is that Hyundai's purchase (of Dongbu) may disrupt the ecosystem of the specialty steel market," an industry insider said. "I don't rule out the possibility that Hyundai Steel will press smaller specialty steel makers to use its basic steel products by taking advantage of Hyundai Motor's buying power."
Dongbu Special Steel is known to have bought 300,000-400,000 tons of steel coils from POSCO annually. But industry insiders say under Hyundai's control, it seems predictable that Dongbu will stop or at least reduce the amount of steel coil it purchases from POSCO.
Shares of Hyundai Steel slipped 1.76 percent or 1,200 won to close at 66,800 won, Friday. The benchmark KOSPI closed at 1,925.69, down 5.96, or 0.31 percent.
"It will have limited impact on Hyundai Steel's credit rating considering its cash reserves," said NICE Investors Service. As of June, Hyundai Steel has more than one trillion won deposited in bank accounts.
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