Hyundai Steel plans to take over the cold-roll steel making business of its affiliate Hyundai Hysco in a share deal that values the operation at 2.8 trillion won ($2.6 billion).
The agreement between the two members of the Hyundai Motor Group, the nation’s second-largest business conglomerate, will allow it to better compete with Posco, South Korea’s biggest steelmaker, just as the fight an industry wide fall. Steelmakers globally have been fending off dwindling profits as Europe’s debt crisis and China’s slowdown decreased both demand and prices.
“Hyundai Steel will become a complete steelmaker, able to rival the country’s biggest steelmaker Posco,” said Lee Won Jae, an analyst at SK Securities Co. in Seoul. “This is definitely a positive factor considering that there are no steelmakers around the world that has a parent company like Hyundai Motor Group, which has ongoing demand for steel products.”
Hyundai Steel and Hysco are among the vital components in Hyundai Motor’s auto production supply chain, which goes from the raw-material steel to the end-product, constructed cars. Hyundai Steel sells hot-rolled coil steel to Hysco, which is then used as a raw material to make car sheets that are acquired by Hyundai Motor, the world’s fifth-largest automaker.