POSCO to invest in Hyundai Steel’s Louisiana plant

South Korea’s top steel maker POSCO has decided to invest in Hyundai Steel Co.'s first overseas plant in Louisiana and collaborate on research and development in low-carbon steel products and rechargeable battery materials such as lithium, cathode and anode materials.

POSCO Holdings Inc. on Monday signed a memorandum of understanding with Hyundai Motor Co. on the collaboration, under which it is said to be mulling an investment in the trillion-won range into the 8.5-trillion-won ($6.0 billion) steel mill project.

They are ironing out the terms of the deal and other details such as the size of its investment and the stake it will take in the plant.

The deal marked the first overseas collaboration by South Korea’s two largest steelmakers on investment and production as they grapple with sweeping 25% tariffs on all steel imported into the US, announced by the Trump administration in March. Their US-made products will be free of the import duties.

“Our two companies will be able to navigate global trade pressures and industry shifts, identifying sustainable growth opportunities across the groups’ core businesses, including steel and secondary battery materials,” said Lee Jutae, president of POSCO Holdings, at the MOU signing ceremony.

Hyundai Motor Group, the parent of Hyundai Motor and Kia Corp., plans to raise about half of the 8.5 trillion won investment through equity investments by Hyundai Steel, its affiliates and outside investors. The remaining funds will be secured through debt financing. 

A WIN-WIN DEAL

The tie-up between Hyundai Motor Group and POSCO would be a win-win for the third and fifth-largest business groups in South Korea, respectively. It will ease Hyundai's financial burden, while securing a production base for POSCO in the world’s largest economy.

POSCO had explored joint ventures or equity investments in the US to establish a production base there.

ArcelorMittal, the world’s No. 1 steelmaker, is said to have expressed interest in the project and could join as an equity investor, according to industry watchers.

POSCO is considering processing and marketing a portion of the steel products to be rolled out at Hyundai Steel’s plant in Donaldsonville, Louisiana.

“We will be able to secure a foothold in the North American steel market, which had been restricted for over a decade due to protectionist trade barriers,” said POSCO.

BATTERY MATERIALS

Under the agreement, Hyundai Motor expects to source secondary battery materials directly from POSCO Group to ensure stable supply and enable the design and production of batteries optimized for its electric vehicles.

For its foray into the battery industry, Hyundai is building a battery R&D center in Anseong, Gyeonggi Province. The facility will house pilot lines capable of producing and testing batteries enough to charge 10,000-20,000 cars.

POSCO said the two sides will collaborate to build stable and diversified supply chains for secondary battery materials. They will also jointly develop next-generation battery materials and eco-friendly steel, as well as future mobility technology.

FROM ADVERSARIES TO ALLIES

POSCO and Hyundai Motor have long had a tense rivalry dating back to when the automaker first moved into steelmaking. Two decades ago, POSCO cut off steel supplies to Hyundai in response to the latter’s push for in-house steelmaking.

However, rising trade risks under the Trump administration prompted the two to join forces amid low emission requirements and price competition from their Chinese rivals.

At the US plant, they also plan to produce carbon-free steel products with hydrogen, not fossil fuels. 

Write to Woo-Sub Kim at duter@hankyung.com
 


Yeonhee Kim edited this article.