Heat Treat Industry News

January 19, 2010

(3rd LD) Hyundai Steel starts its first-ever integrated furnace

Hyundai Steel Co., South Korea's No.2 steelmaker, on Tuesday started its first-ever integrated blast furnace in this southwestern coastal city after a three-year construction period.

The company plans to start in April the commercial operations of the first blast furnace that has an annual production capacity of 4 million tons of steel products, according to Hyundai Steel.

Once finished, the plant, the nation's third integrated steel mill which houses two blast furnaces, will churn out a total of 8 million tons of steel products annually, including 6.5 million tons of hot-rolled steel sheets. The second blast furnace is still under construction with completion due for next year.

"We should redouble efforts to make the steel mill the most competitive in the world," Hyundai Motor chairman Chung Mong-koo said in a speech at a ceremony marking the operation of the first furnace.

Following the completion of the second blast furnace, Hyundai Steel expects it will have an annual capacity of around 20 million tons. Hyundai Steel is currently only equipped with electric furnaces that produce some 11 million tons of steel annually, using scrap metal.

Steel used for construction accounts for around 70 percent of its sales.

Shares of Hyundai Steel closed at 91,000 won on the Seoul bourse, up 0.33 percent.

"Hyundai Steel is positioned to benefit from its increased production and a recovery in the global sector," said Kim Kyong-choong, an analyst at Samsung Securities. "From February, prices of scrap steel and steel beams will rise by around 10 percent."

Hyundai Steel, the unit of Hyundai Motor Group, took over the facility from now-defunct Hanbo Iron & Steel Co. in 2004. Building an integrated steel mill is known to have been a long-time dream for Hyundai Group, since the days of late Hyundai founder Chung Ju-yung.

Previous attempts in 1977, 1994 and 1997 were unsuccessful due to difficult economic conditions and the vast amounts of money needed.

Hyundai Steel said earlier around 5.8 trillion won (US$5 billion) will be invested until 2011 in the two furnaces, which will help the steelmaker make high-quality products such as automotive steel and plates used for ships to compete with bigger rival POSCO, which has an annual capacity of 33 million tons.

Hyundai Motor Group, which owns the nation's two largest carmakers, is expected to be one of the key beneficiaries of the mill, as its production will secure a stable supply of steel for auto manufacturing.

Hyundai Steel chief executive officer Park Seung-ha said the furnace will be able to produce around 3 million tons of steel this year after its full operation, slated for April, begins.

He also said the steelmaker will be able to supply steel from its furnace to Hyundai Motor Co. and Kia Motors Corp. this year.

"We supplied 700,000 tons of steel plates for carmakers last year... and this year's supply may be higher than that," Park said.

Although POSCO, the country's leading steelmaker, supplies about 40 percent of South Korea's steel needs, the country still imports the remaining steel because the world's fifth-largest steelmaker has been the only steelmaker that has an integrated steel mill.

South Korea is the world's sixth-largest steelmaking country, but still imports 20 million tons of steel products. In 2008, the country imported 28.94 million tons of steel.

According to Hyundai Steel, the furnaces are expected to replace $8 billion worth of steel imports a year.

Hyundai Steel said earlier it plans to additionally build a third blast furnace by 2015, which will increase its total annual production capacity to 12 million tons.

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SOURCE: TRADINGMARKETS.COM

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