Hyundai Steel Tackles Trump-era Tariff Risks with U.S. Steel Plant Construction
With poor domestic demand, Hyundai Steel's outlook for the fourth quarter is not promising, and concerns are growing that the sharp rise in the won-dollar exchange rate will negatively impact profitability. However, some analysts believe that performance could improve in the second half of the year, supported by strengthened regulations on imports of Chinese steel and the recovery of export profit margins for steel pipes. Hyundai Steel is currently focused on bottoming out and preparing for a market rebound. According to industry sources on January 8, Hyundai Steel's fourth-quarter performance is expected to be poor due to factors such as falling product prices and rising electricity costs. Analysts in the securities industry project Hyundai Steel's consolidated revenue to reach 5.8 trillion KRW and operating profit to be 833 billion KRW. Operating profit is expected to slightly miss the market forecast of 1.02 trillion KRW. Despite the end of the off-season in the third quarter, the continued sluggish demand for long steel products in the domestic market is expected to result in a total sales volume of 4.3 million tons, a 2.6% decrease compared to the previous year. While the average import price of Chinese iron ore stabilized at around $101 per ton in the fourth quarter of last year, there are widespread concerns that the high exchange rate will inevitably increase cost pressures. Considering the weakness in coking coal prices, Hyundai Steel's input cost for blast furnace raw materials in the first quarter is expected to be similar to that of the fourth quarter. In this situation, Hyundai Steel is actively preparing the groundwork for a rebound after the slump. The industry is focusing on the potential improvement in steel demand driven by China's economic stimulus measures, with some analysts presenting optimistic forecasts. Although the sluggish demand in the construction sector is expected to persist, some analysts believe that the margin will increase as the decline in raw material prices is expected to be greater than the drop in product prices. In the case of long steel products, rebar steelmakers announced they would temporarily suspend low-price supply to distributors, which has led to a rebound in distribution prices since the end of the year. Hyundai Steel is considering local investments in the U.S. to address uncertainties surrounding tariff policies ahead of the inauguration of President Donald Trump's second term. This move is part of the company's efforts to mitigate potential risks and ensure stability in its operations. Hyundai Steel is reportedly considering the construction of a steel plant in the U.S. capable of producing automotive steel plates. This move is seen as an effort to overcome trade barriers, such as the steel tariffs imposed by the Trump administration, and to supply Hyundai Motor Group's U.S. plants through local production. Hyundai Motor Group operates Kia's plant in Georgia and Hyundai's plant in Alabama. Additionally, the group is constructing a dedicated eco-friendly electric vehicle factory, MetaPlant America (HMGMA), in the Savannah area of Georgia. At the shareholders' meeting in March last year, Hyundai Steel CEO Seo Kang-hyun stated, "We are considering local production bases to respond to global protectionism," and "We are carefully analyzing the optimal regions to overcome trade barriers." In 2018, during the Trump administration's first term, the U.S. government introduced an import quota system instead of imposing tariffs on South Korean steel, allowing for an annual quota of 2.68 million tons. Under this system, steel exported from South Korea to the U.S. is subject to duty-free treatment up to the 2.68 million-ton limit. A Hyundai Steel representative stated, "This year, expectations for an improvement in the market are rising, as the demand for eco-friendly ships in the shipbuilding industry, a major steel consumer, is increasing." They continued, "In the construction sector, leading indicators such as orders and the area of new construction are expected to recover. Despite challenging circumstances, the company is continuing its efforts to focus on high-value-added products and build an optimal production and sales system." The representative added, "Thanks to these conditions, profitability is expected to improve compared to last year. However, since there hasn't been a significant increase in product prices, it is anticipated that profitability will not improve easily in the fourth quarter." ChatGPT를 사용하여 번역한 기사입니다.
