As Hyundai Steel decided to shut down rebar facilities at its Incheon plant, there is growing speculation that restructuring in the struggling steel industry will continue. However, some say the rebar market has a high domestic production ratio, so many corporations are likely to hold out until conditions improve, and because small and midsize steelmakers mainly rely on rebar, the trend will not spread into a sweeping industrywide restructuring.
On the 31st, according to the steel industry, Hyundai Steel recently decided to shut down an electric furnace steelmaking line and small-section rolling facilities at its Incheon plant with an annual capacity of 800,000 tons (t). The facilities, which halted operations on the 4th, accounted for more than half of the plant's total rebar output of about 1.55 million t a year.
With this decision, only the steelmaking plant and the rebar rolling plant (annual capacity of 800,000 t) will remain in the rebar division at Hyundai Steel's Incheon plant. Hyundai Steel's total rebar production capacity was also cut 22% to 2.6 million t from 3.35 million t.
Hyundai Steel's decision to shut facilities stems from a prolonged slump in the rebar market. Last year, domestic rebar demand was about 7 million tons (t), far below the domestic steel industry's total production capacity of 12.3 million t. Because of this, there is even talk in the industry that "the more rebar you sell, the deeper the losses."
For this reason, the government last year announced plans to adjust facility scale for oversupplied items as part of its steel industry advancement measures, and Hyundai Steel is seen as having joined those efforts.
Still, many in the industry say it is uncertain whether the downsizing trend for rebar facilities will spread to other steelmakers.
Dongkuk Steel Mill, the No. 2 domestic rebar producer, has an annual rebar capacity of 2.57 million t. Of that, the Incheon plant can produce 2.2 million t. Dongkuk Steel Mill is weighing facility adjustments due to falling rebar demand, but is reportedly finding it hard to push ahead with closures and has been unable to make a quick decision.
Mid-sized steelmakers such as DaehanSteel, KISCO, YK Steel, and Korea Special Steel also produce rebar. Because rebar makes up a large share of their total sales, it is inevitably more difficult for them to adjust facility scale.
DaehanSteel, with an annual rebar capacity of 1.55 million t, generates about 90% of its total sales from rebar. KISCO, which can produce 1.2 million t of rebar annually, gets 95% of its sales from rebar. YK Steel, with an annual rebar capacity of 850,000 t, also derives 83% of its sales from rebar.
The steel industry expects that, unlike large steelmakers that also produce bar and shape steel or flat products, small and midsize steelmakers, which are highly dependent on rebar, are more likely to lower operating rates and hold out rather than adjust facilities.
A steel industry official said, "Because the steel industry is a capital-intensive business, it is not an easy decision to reduce facilities that have been operated and maintained at great expense." The official added, "After the coronavirus outbreak, there was a time when the economy recovered and rebar demand also increased," and "considering the possibility of a recovery in the construction market, many companies will not readily move to reduce facilities."