Hyundai Steel to pull out of stainless steel market

Hyundai Steel Co. has decided to close its stainless steel-making plant in Incheon, South Korea, pulling out of the market amid a flood of Chinese-made products and declining sales at its affiliates and key customers Hyundai Motor Co. and Kia Corp.

The steelmaker recently informed its labor union of the decision, according to steel industry sources on Wednesday. It will transfer the Incheon factory employees to other plants after shutting down the plant at the end of this year.

Hyundai Steel has sold stainless steel through its subsidiary Hyundai BNG Steel Co. since January 2022, after transferring its sales rights of stainless steel to the subsidiary.

Stainless steel is not prone to corrosion and rust, so it is used in kitchen utensils, automobiles and aircraft, as well as the construction sector.

 
However, Hyundai BNG has decided to stop selling stainless steel made by Hyundai Steel.

“We were notified by Hyundai BNG Steel that they will not place orders [for stainless steel] after September,” said a Hyundai Steel official.

“Because we have no other sales channel, we have decided not to produce any more stainless steel. Instead, we will focus on high-end products such as automotive steel plates.”

Hyundai BNG operates its own stainless steel manufacturing plant in Changwon, South Gyeongsang Province.

Hyundai Steel's move comes as it scales back its Chinese operations.

Last month, the steelmaking unit of Hyundai Motor Group signed an MOU to sell its Chinese subsidiary in Chongqing to an unidentified local company, following its decision to sell its Beijing unit.

Last year, Hyundai Steel’s Incheon factory produced 100,000 tons of stainless steel, half its annual capacity.

Built in 1990, the factory once produced as much as 200,000 tons, posting record-high sales of about 300 billion won ($226 million) a year.

Its key customers and — Hyundai Motor and Kia Corp. — were battered by China’s decision in 2016 to restrict Korean imports in retaliation for Seoul’s deployment of a US Terminal High Altitude Area Defense System (THAAD).

Reeling from its weak car sales in China, Hyundai Motor has put its Chongqing plant up for sale as part of restructuring measures to survive in the world’s biggest car market.

Despite cumulative losses at its Chinese units, Hyundai Steel posted a 57% surge in operating profit to 1 billion won in 2022, with sales up 40% to 46.1 billion won, compared with the previous year.

Write to Jae-Fu Kim and Hyung-Kyu Kim at hu@hankyung.com
 

Yeonhee Kim edited this article