Posted on 30 Nov 2022
The failed dream of former South Korean coated sheets producer Dongbu Steel to advance into hot-rolling could soon be reborn on the other side of the world in Romania, following an agreement concluded late last week between Korea's KG Steel and UK-based Liberty Steel Group.
"The purchase of this state-of-the-art steel plant from KG Steel is part of our strategic plan to develop low carbon, modern and flexible steel plants and achieve our ambition to become carbon neutral by 2030," said Liberty Steel investment executive Sandip Biswas in a statement. "From our technical assessment of the plant, we believe it can be benchmarked to the highest operational efficiency levels and integrated into our existing asset footprint."
The plant is the upstream operation at Dongbu's Dangjin works on South Korea's west coast. Dongbu had inaugurated it with much fanfare in 2010, but which less than a decade later, it contributed to the company having to seek protection from creditors and be eventually taken over by second-tier conglomerate KG Group in September 2019, as Mysteel Global reported.
Pending final technical assessment and further diligence, Liberty intends to relocate the plant – which has a crude steel capacity of 3 million tonnes/year and can produce 2.85 million t/y of finished products – at its Galati plant in Romania. The equipment consists of two Consteel 160t electric arc furnaces (EAFs), two single strand, vertically-curved thin slab continuous casters and a hot strip mill (HSM) supplied by Danieli.
Korean media reports quote KG Steel as saying the purchase and sale agreement with Liberty is worth $68 million but does not reflect the exercise of the option of the buyer, Galati Steel Plant Operating Corporation. Liberty's deadline for exercising its option is June 30 2023.
Galati, which Liberty acquired in 2019, is Romania's largest integrated steelworks and produced 2.35 million tonnes of crude steel last year.
An end to a long saga
The sale of the upstream component at the Dangjin works, announced on November 25, could finally bring an end to a long saga that began over two decades ago when Dongbu, the first company in South Korea to produce cold-rolled steel sheets in 1967, decided that it wanted to free itself from having to rely chiefly on POSCO and Japanese integrated makers for the hot coil feeds for its cold-rolling and coated sheet business.
Besides tinplate, Dongbu's product focus at the time was mainly galvanized and pre-painted sheets for use in construction applications such as roofing, electric appliances and furniture, where hot coils produced using EAFs and thin slab casting technology were perfectly acceptable in terms of quality – even though Dongbu had no experience in either upstream steel production or HSM operations.
The adventure proved problematic for Dongbu Steel, with the company being eventually brought under creditor protection in October 2015 nursing massive debts. These eventually forced its largest creditor, the state-run Korea Development Bank (KDB), to begin trying to dispose of its assets, the largest of which was the Dangjin upstream component.
In March 2016, KDB was hopeful of success when an Iranian steelmaker joined the bidding to buy the EAF and hot-rolling operation, purportedly offering $106 million, only to have the deal collapse the following year.
"Some creditors are anxious about selling a core steel production facility to an entity based in Iran, with uncertainties over the nuclear deal that could affect the easing of international sanctions," one Korean report said at the time.
A negative impact on other Korean EAF makers?
KG Steel's sale to Liberty has sparked comment in Korean steel circles, with some commentators wondering what KG will use the money for, assuming the sale proceeds. In its November 25 statement, KG said blandly the proceeds would be used to reshape its "financial structure."
Meanwhile, Korea's other steelmakers – both blast furnace and EAF operators – will be relieved that the Dangjin operation will be travelling abroad.
In September this year when talks between KG and Liberty were nearing conclusion, rumours were circulating in the Korean market that Liberty was planning to restart the Dangjin plant as its own production base in the country. Such a plan would have major implications for domestic users of scrap, suddenly having two huge 160 tonne EAFs needing to be fed.
"If Liberty Steel operates an (EAF) plant in South Korea, it will have a negative impact on other electric furnace companies in Korea," SteelnSteel observed. "South Korea is a country with a shortage of ferrous scrap, and there is an even greater shortage of high-grade iron scrap required to operate a hot-rolled plant with electricity," the Korean steel daily had noted.
If the deal with Liberty proceeds, the EAFs and HSM will not be the first items of used equipment to sail abroad from Dangjin. Ironically, about a kilometre or so from the Dongbu plant there lies the former Hanbo Steelworks which – following Hanbo's own spectacular collapse in 1997 with debts of $5.85 billion – is now owned by Hyundai Steel.
In 2007, India's Essar Steel bought the Corex plant erected for Hanbo and relocated it to its Hazira works in Gujarat, India. The two C2000 nodules were restarted in Hazira in August and December 2011.
Source:Mysteel Global
