On the 16th, part of the production equipment of multiple production lines of South Korea's largest steel producer Posco started to halt for the first time since the 2009 financial crisis. Not only that, Posco Steel invested approximately RMB 2.33 billion to maintain and rebuild the No. 3 blast furnace of Gwangyang Steel Plant, which was originally planned to resume production at the end of May, but it has now been postponed. In addition, Hyundai Steel, the second largest steel company in South Korea, also closed the Karatsu hot-rolled steel plant with an annual capacity of 1 million tons earlier this month. This is also the first time this steel plant has shut down since it went into operation in 2005.
Korean steel companies have been shut down one after another, mainly due to the sudden drop in steel demand from downstream customers such as automobiles, shipbuilding, and construction. Taking the automobile industry, which accounts for 30% of steel demand as an example, data from the Ministry of Trade, Industry and Energy of the Republic of Korea showed that South Korea’s automobile production in May was only 230,000, a decrease of 40% year-on-year.
At the same time, the rising price of iron ore raw materials in the upstream industry has also worsened the operation of Korean steel companies. At present, the global iron ore price has exceeded 100 US dollars per ton. Under the double impact of the sharp shrinkage in demand and the increase in raw material prices, Posco’s first-quarter sales decreased by 9% year-on-year, and its operating profit dropped by 40% year-on-year. .
In order to avoid long-term deterioration in earnings, South Korean steel companies have launched self-help. For the first time since the company was founded, Posco has allowed employees to take paid vacations and lowered its investment quota for this year. Recently, the two leading Korean steel companies, Pohang and Hyundai, have established a fund of approximately 580 million yuan with the Korean Steel Association and banks to help small and medium-sized steel companies that are hitting more to maintain their operations.
