Posted on 28 Jul 2022
Despite industrial unrest and deteriorating economic conditions at home and abroad, Hyundai Steel, South Korea's second-largest steel producer after POSCO, reported strong earnings during the April-June quarter, with its consolidated net profit soaring by 61% on-year to KRW 567 billion won ($433 million) and beating the company's previous record result for a quarter of KRW 596 billion for last year's July-September period.
The company's performance also beat market expectations, where most analysts had predicted profits would reach KRW 538.5 billion, according to the survey by Yonhap Infomax, the financial data firm of South Korea's Yonhap News Agency.
In a regulatory filing Tuesday, the steelmaker, which operates blast furnaces, mini-mills and special steel facilities in four major plants nationwide, attributed its improved performance to strong demand for steel flat products used for automobiles and ships, and a rise in prices of key products.
Earlier this year in negotiations with the country's leading automakers Hyundai Motor (Hyundai Steel's part-parent) and Kia Motors for January-June automotive sheet prices, Hyundai Steel, POSCO, and other steelmakers demanded an increase of KRW 150,000-200,000/tonne from H2 last year.
"(Hyundai Steel's) successful price negotiations for automotive sheets and shipbuilding-purpose steel plates for the first half led to price hikes, while growing demand for oil well pipe since 1Q contributed to a mark-up in steel pipe prices," noted Jung Hye-jung, an analyst with KB Securities in Seoul.
During April-June, Hyundai Steel's average unit price soared by 39% on-year to reach KRW 1.35 million/tonne, she calculates, adding that the company's product spread expanded by 52% during the quarter to KRW 217,000/tonne.
However, "steel product spreads will inevitably narrow in Q3, as global steel prices turned bearish from end-2Q due to concerns over shrinking steel product demand amid interest rate hikes (and the) resurgence of COVID-19," she warns in a recent note to investors, adding that prices of iron ore and coking coal are likely to rise this quarter, adding to the steelmaker's costs.
In June, Hyundai Steel was among the many South Korean companies whose operations were impacted by the week-long truck drivers' strike that delayed deliveries of key inputs including raw materials, as Mysteel Global reported at the time. But currently, Hyundai Steel has a more serious industrial-relations situation closer to home.
For months, a company union aligned to the militant Korean Confederation of Trade Unions (KCTU) has been occupying CEO and managerial offices at various of the company's steelmaking sites, demanding steep increases in wages, despite ongoing woes in the steel industry from surging raw material prices and softening global demand.
According to local daily the Maeil Pulse, "Hyundai Steel CEO Ahn Dong-il has been unable to check up on the steel complex in Dangjin (on Korea's west coast) – responsible for half of the steelmaker's annual 24 million tonnes output – as his office has been occupied by union strikers since May 2."
Although there is no word on whether steel production has been affected, the business daily reported that on July 20, contract workers at Hyundai Steel's Ulsan plant in Korea's southeast corner halted work in line with the nationwide strike by members of the Korean Metal Workers' Union under the KCTU, causing the plant to suspend production for 12 hours.
During 2021, Hyundai Steel produced 19.64 million tonnes of crude steel, according to World Steel Association data, ranking the company the 17th largest worldwide.
Source:Mysteel Global
