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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