Korea Times reported that POSCO and other local steelmakers have been struggling to cope with high prices of iron ore and other raw materials and the global oversupply of steel over the past year. Falling demand for various steel products as a result of the European debt crisis and the slowing Chinese economy has also wreaked havoc on steelmakers.
However, Hyundai Hysco, an affiliate of Hyundai Motor Group producing mostly automotive steel plates, has been an exception to this prevailing trend. The mid sized steelmaker has remained largely unscathed from the ongoing steel industry slump on the back of the booming automobile industry.
The company saw its revenue jump 10% to KRW 4.33 trillion in the first six months of 2012 from the previous one, with its operating income jumping 4% YoY to KRW 238.3 billion.
In contrast, POSCO, the world's third largest steelmaker, earned KRW 32.8 trillion in the first half, down from KRW 33.3 trillion in the same period last year. Its operating profit fell sharply to KRW 1.85 trillion from KRW 3.1 trillion.
Hyundai Steel, Korea's second largest steelmaker also saw its sales inch down to KRW 7.4 trillion from KRW 7.6 trillion, with its operating income plunging to KRW 491 billion from KRW 724.5 billion.
Analysts said that Hyundai Hysco has benefited greatly from soaring demand for automotive steel sheets from Hyundai Motor, Kia Motors and other carmakers.
Mr Aum Jin seok, an analyst at Kyobo Securities, said that "Thanks to the booming automobile industry, the steelmaker has been able to remain largely unharmed from the current steel industry downturn. The firm has sold a record volume of automotive steel plates to Hyundai and Kia."
Hyundai Motor sold a record number of vehicles across the globe, earning KRW 21.9 trillion in the first half of 2012, while its sister firm Kia making KRW 12.56 trillion. Hyundai Hysco earned KRW 644.6 billion in the first half, up by 28% YoY, from dealings with the two carmakers and other group affiliates.
The firm buys hot rolled steel plates from Hyundai Steel and other steelmakers operating a furnace. It then processes hot rolled steel sheets into cold rolled ones, which can be used for cars and other industrial products.
Mr Aum said that "Additionally, the falling prices of hot rolled steel plates as a result of the supply glut have benefited Hyundai Hysco over the past year. An influx of low priced steel sheets from China has slashed market prices."
Hyundai Hysco paid an average of KRW 880,000 per tonne in the first six months of 2012, down from KRW 900,000 from the previous one.
Mr Aum projected that the company will perform even better for the remainder of 2012. He said that "Thanks to robust steel demand from Hyundai and Kia, Hysco will make more money in the second half. The firm plans to boost its production capacity by 700,000 tonnes before the year's end, which will significantly boost its sales next year."
Mr Aum then said POSCO and Hyundai Steel will continue to struggle through the fourth quarter of 2012, due to the stagnant steel demand across the globe. But he expects the companies will perform better from the first quarter of 2013, thanks to cheaper iron ore and other commodities and a global economic rebound.
Source - Korea Times
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