Hyundai Steel, a leading South Korean steelmaker, has decided to temporarily halt its plans to close the Pohang No.2 plant. This decision comes in the wake of significant opposition from both the government and labor unions. The move adds complexity to Hyundai Steel's operational challenges, as the company emphasizes its commitment to ongoing negotiations aimed at ensuring employment stability for its workers. The pause reflects the importance of balancing corporate strategies with social responsibilities, especially in a sector that is vital to the local economy.
The Pohang facility is a crucial part of Hyundai Steel's operations, boasting an annual crude steel capacity of one million metric tons and a small sections steel rolling capacity of 700,000 metric tons for construction use. However, the plant has been operating at only 10-20% of its capacity during 2024, which raises concerns about its viability. This underutilization is a stark contrast to the plant's previous production levels, highlighting the significant challenges facing the steel industry.
Recent reports from local media, including Aju News, indicate a troubling decline in the plant's production figures. Steel production has dropped from 680,000 metric tons in 2022 to just 510,000 metric tons this year. Similarly, rolling output has seen a decrease from 390,000 metric tons to 230,000 metric tons. Compounding these issues, the number of operating days has fallen dramatically from 304 days to 228 days. As a result, manufacturing costs have surged, increasing from KRW 990,000 per metric ton, approximately $732, to KRW 1.13 million.
The decline in production and rising costs can be largely attributed to the aggressive pricing strategies employed by Chinese steelmakers. These companies have flooded the market with low-cost products, significantly impacting South Korean steel producers like Hyundai Steel. The influx of cheap steel has coincided with sluggish demand in China's domestic real estate sector, further exacerbating the difficulties faced by South Korean manufacturers.
Additionally, Hyundai Steel is grappling with the effects of an ongoing economic recession, which has weakened the performance of South Korea’s construction sector. This sector is a key consumer of steel products, and its downturn has directly affected demand for Hyundai Steel's offerings. The combination of increased competition from abroad and reduced domestic demand has placed immense pressure on the company’s operations.
In light of these challenges, Hyundai Steel is focusing on enhancing its competitiveness. The company aims to meet the growing demand for high-value-added steel products and is committed to developing carbon-reducing solutions. These strategies are part of a broader effort to adapt to changing market conditions and ensure the long-term sustainability of its operations.
Amid these developments, the mayor of Pohang convened an emergency meeting to address the ongoing challenges facing the steel industry. The mayor has actively sought support from the National Assembly, advocating for measures to assist South Korean steelmakers during this crisis. Proposed solutions include subsidies for small and medium-sized enterprises, reductions in industrial electricity prices, and expedited handling of anti-dumping cases. These initiatives aim to create a more favorable environment for local steel producers and help them navigate the current market difficulties.
