Hyundai Steel Begins Operations at New Blast Furnace

Nov. 23, 2010 - Hyundai Steel Co., South Korea's second-biggest steelmaker, started operations at a second blast furnace, expanding capacity by about 25 percent, and confirmed plans for a third as it boosted competition with rival Posco.
Annual capacity increased to 20 million metric tons with the start of the latest furnace located in Dangjin, south of Seoul, which can produce 4 million tons of crude steel a year, according to a statement from Incheon-based Hyundai Steel. The first blast furnace began operations in January. Previously, the mill made steel only from scrap, using electric arc furnaces.
The company will prepare for construction of a third one depending on market conditions, President Woo Yoo Cheol said at the new plant after a furnace-igniting ceremony.
Hyundai Steel, a unit of the Hyundai Motor Group, has gained 27 percent this year on expectations that the expansion will boost profit, outperforming a 27 percent decline in bigger rival Posco. Hyundai's two furnaces, costing 6.23 trillion won ($5.4 billion), may replace imported steel and eat into Posco's share, especially, in the automotive steel market.
"The new furnace will help reduce production costs and increase overall output," Shin Yoon Shik, an analyst with Meritz Securities Co. in Seoul, said before the furnace opening. "We expect Hyundai's operating profit to increase next year on the new furnaces."
Hyundai Steel, the nation's biggest maker of construction steel, reported third-quarter profit of 260.8 billion won last month, beating analyst estimates as increased sales of flat products offset a slump in construction steel.
Third Furnace
The two new furnaces have a combined capacity of 8 million tons per year. Hyundai produced 9.9 million tons of steel last year, according to the company's website.
"Now that we have completed the second furnace, we will prepare for a third furnace,"President Woo said. "We'll proceed with it depending on market conditions." The company is seeking regulatory permission for the third one, he said.
Flat products, used mostly to make autos and ships, will account for 63 percent of the company's production by 2015 on assumption that a third furnace is completed by then, up from 26 percent in 2008, Hyundai said today. Long products, or construction steel, comprise the rest of its output.
Posco, the world's third-biggest steelmaker by output, was the only South Korean mill to make crude steel from blast furnaces, which use iron ore and coal, before Hyundai's plants started up.