POSCO’s JV Company in US Having Difficulties Due to High Tariffs

Posted on 30 May 2018

Source: Business Korea

USS-POSCO Industries (UPI), the US subsidiary of POSCO, remained in the red for the sixth consecutive quarter in the first quarter of this year. POSCO and U.S. Steel established UPI in 1986 by investing 49% and 51%, respectively. The joint venture company posted a loss of 22 billion won (US$21 million) in the fourth quarter of 2016 and has remained in the red all the way since then.

The poor performance of the company has to do with the high U.S. tariffs on South Korean hot rolled steel sheets. UPI manufactures and sells cold rolled and plated steel sheets by importing hot rolled steel sheets from South Korea, but the United States imposed anti-dumping and countervailing duties of up to 60% on South Korean hot rolled steel sheets in 2016 and this has made it almost impossible for UPI to use the material from South Korea. UPI sought a local alternative but could not avoid an additional cost burden as local products were 20% to 30% more expensive. Besides, import restrictions followed one after another in the United States toreduce the steel supply in the country and make procurement more and more difficult. 

UPI has tried to persuade the U.S. government, only to fail. The U.S. Department of Commerce has not budged at all in spite of the possibility that more than 600 UPI workers could be negatively affected. At present, UPI is going through a very hard time, trying to block the import of plated steel sheets from countries like Japan so that the prices of its products can be raised at least to some extent. 

The other South Korean steel companies that are running their plants in the United States are facing a lot of difficulties as well. For example, the local corporation of TCC Dongyang posted a loss of approximately one billion won last year after the U.S. Commerce Department’s 64.7% retaliatory tariff on POSCO’s cold rolled steel sheets in 2016 that has resulted in an excessive material cost burden. 

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