The South Korean steel industry faces a significant turning point as Hyundai Steel, the country's second-largest steel producer, moves toward closing its Pohang Plant 2. This strategic decision comes as the company grapples with deteriorating market conditions and intense competition from Chinese imports, marking a crucial moment in South Korea's industrial landscape.
The Pohang Plant 2, with its annual production capacity of 700,000 metric tons, represents a substantial portion of Hyundai Steel's manufacturing capabilities. The facility, which handles both steelmaking and rolling operations, has been struggling to maintain profitability in an increasingly challenging market environment. The company's third-quarter results reflect these difficulties, with operating profits plunging 77.4% year-on-year to 51.5 billion won ($36.6 million).
Market pressures have intensified due to a perfect storm of challenges. The construction sector's slowdown has significantly reduced domestic demand, while Chinese manufacturers have flooded the market with low-priced steel products. This combination has created unprecedented pressure on South Korean steel producers, forcing them to reconsider their operational strategies. Earlier this year, Hyundai Steel had already implemented a six-month overhaul of its Incheon plant facilities in an apparent attempt to reduce output.
The company's response to these challenges has been multifaceted. In July, Hyundai Steel filed anti-dumping complaints with the government against Chinese steel plate imports, seeking protection from what it considers unfair pricing practices. However, these defensive measures have proved insufficient to maintain profitable operations at all facilities.
Labor relations add another layer of complexity to the situation. The company's union has expressed opposition to the plant closure, setting the stage for potentially difficult negotiations. Management and union representatives are scheduled to meet to discuss the closure's implications and possible alternatives, though the company maintains that no final decision has been made.
The broader implications for South Korea's industrial sector are significant. The potential closure reflects structural changes in the global steel industry, where overcapacity and price competition from China are reshaping market dynamics. Industry analysts suggest that these challenges could intensify under a potential second Trump presidency, with expectations of heightened trade barriers and tariffs.
