Hyundai Steel plans merger with Hysco to reduce costs and enhance competitiveness

South Korea’s second-largest steel manufacturer Hyundai Steel has said, they were planning merger with Hyundai Hysco to take over the latter’s core rolled and coated sheets business, which intended to reduce financial costs and improve profitability. Hyundai Steel is expected to complete the merger in December 31 of this year, Hysco will hold Shareholders’ meeting on November 29 this year to discuss the merger decision.

The face of the European debt crisis and the slowdown in Chinese demand for steel, Hyundai Steel etc. the world’s major steel mills is in the plight of declining profits. The merger will reduce the financial cost of Hyundai Steel and improve competitiveness with other companies. Beacuse merger will produce a more powerful company, to Posco and Dongkuk is not a small pressure, especially in the domestic cold-rolled capacity oversupply and too little demand of market conditions. Currently, Korea POSCO, Dongbu Steel and Hyundai Hysco annual supply of cold rolled coils plus imports totaled about 21 million tons, while domestic demand only about 12 million tons.

As Hyundai Motor Group’s two subsidiaries of steel, Hyundai Steel sells hot-rolled coils to Hysco, Hysco processed into automotive sheet then sold to their parent company Hyundai Motor Group. This Hyundai Steel and Hyundai Hysco to provide end supply chain for automotive manufacturers is unique in the world.

Hyundai Steel production the third annual capacity of 4 million tons of blast furnace in September, steel production increased significantly. 3 blast furnace of crude steel production capacity is 12 million tons, including 12 million tons of electric furnace steel production capacity, Hyundai Steel Total crude steel production capacity is 24 million tons. After the merger, Hyundai steel sales expected to grow from last year’s 14 trillion won to 20 trillion won, at the same time also reduce financial costs. According to report, for the construction of the third blast furnaces to make Hyundai steel liabilities of approximately 11 trillion won ($ 10.3 billion), who had to pay about 300 billion won of interest a year.

Hysco Founded in 1975, annual production capacity of cold-rolled is 6.2 million tons, cold-rolled steel sales accounted for sales of 71% last year, about 7 trillion won, 91% of its operating profit. Hysco cold rolled coils and coated steel equipment is located in Hyundai Karatsu factory, the cold rolling, coating and cutting equipment is located near POSCO Gwangyang plant. Hysco had gone into operation annual production capacity of 1.5 million tons cold rolling equipment in Karatsu plant in May this year, this year cold-rolled and coated sheets of production is expected to increase from 4.26 million tons in 2012 to 4.8 million tons, desired ratio of Hyundai Motor Group can increase from the current 40% to 60%.

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