Shutdowns and strikes spell trouble for steel supplies

Industry

Published: 29 Sep. 2022, 16:34 Updated: 29 Sep. 2022, 18:28

Shutdowns and strikes spell trouble for steel supplies

Posco employees clean up at the Pohang steel mill in North Gyeongsang, which was flooded by Typhoon Hinnamnor earlier in the month. The steelmaker said it needs at least three months for production to normalize. [POSCO]

Supply disruptions loom in Korea’s steel industry as the country’s two largest steelmakers are struggling to fully operate their plants.

Posco is still in the process of restoring its Pohang plant that was flooded by Typhoon Hinnamnor earlier this month, while labor unions at Hyundai Steel have been going on a series of strikes after negotiations failed.

The two companies dominate over 80 percent of Korea’s crude steel production.

The price of hot-rolled steel stood at 1.1 million won ($773) per ton on Sept. 23, up 10 percent on month. The price of imported hot-rolled steel also jumped 24 percent to 1.2 million won on month. Hot-rolled steel is commonly used to make components in vehicles.

A ton of H-beam steel traded at 1.3 million won, up 7.5 percent, during the same period. H-beam steel is the major material at construction sites.

The price of stainless hot-rolled steel rose 10 percent to 4.4 million won while the prices of steel plates, which are the main materials for shipbuilding, rose 14 percent in just two weeks.

Prices are expected to rise even more rapidly in coming weeks as Hyundai Steel employees are planning more strikes.

Hyundai Steel’s four labor unions went on strike for eight hours on Sept. 24 and 25. They said they will stage strikes unexpectedly until the company accepts their demands.

Hyundai Steel unions are demanding a base monthly pay raise of 165,200 won and 15 percent of last year’s operating profit as incentives. It also requested 4 million won of bonuses, arguing that employees of Hyundai Motor, Kia and Hyundai Mobis received that amount.

It already voted on the strike and 94.2 percent of workers agreed to a walkout. It won permission from the National Labor Relations Commission to go ahead with its plan.

Hyundai Steel's labor unions that represent irregular workers stage a strike in front of Hyundai Motor headquarters in Yangjae-dong, southern Seoul, on Wednesday. [YONHAP]

Hyundai Steel is Korea’s second-largest steelmaker in Korea after Posco, producing some 20 million tons of crude steel per year.

Hyundai controls some 30 percent of local steel plate production. In terms of the production of H-beam steel, it dominates the market with around 70 percent of the share.

“As of now, Hyundai Steel is the one and only alternative for the supply of steel products amid the absence of Posco’s Pohang steel mill,” said Lee Jae-yoon, a research fellow at the Korea Institute for Industrial Economics and Trade. “If Hyundai employees really go on strike, it will inevitably encourage a steeper price rise in steel products.”

The company’s labor unions that represent irregular workers also went on a 24-hour strike from 6:30 a.m. Wednesday.

The strikes come at the worst time as Posco has still been struggling to repair its Pohang plant after it halted operations earlier in the month for the first time in the factory’s 49 year history.

Three blast furnaces at the factory have resumed operations, but the company is still working on other facilities such as those related to hot rolling and stainless steel.

The steelmaker said it expects to start the production of hot-rolled steel products and steel plates in October. But in the case of stainless products, it needs until December to normalize production.

Posco predicts full normalization will come within three months.

“The further surge in the prices of steel products will be inevitable as some see that it will take about one year for the full normalization,” said Jung Hye-jung, an analyst from KB Securities.

The Pohang plant produced some 16.9 million tons of steel products in 2021, or around 35 percent of all crude steel production in Korea.

Sales from the Pohang plant accounted for 24.2 percent of Posco Holdings’ total sales last year. Posco is a fully-owned subsidiary of Posco Holdings.

Posco will lose an estimated 2.04 trillion won of sales as a result of typhoon damage.

BY SARAH CHEA [chea.sarah@joongang.co.kr]