Steel Pipe Business and Oilbank Stake Sale... Hyundai Steel Tightens Restructuring Reins

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Steel is tightening its grip on restructuring to enhance competitiveness. This is due to recording a quarterly loss in the fourth quarter of last year for the first time since 2001, influenced by rising raw material costs and deteriorating profitability of business divisions.

According to industry sources on the 30th, Hyundai Steel plans to carry out restructuring of non-core businesses this year, including the sale of its steel pipe division, workforce adjustments at its China subsidiaries, and the sale of its stake in Hyundai Oilbank.

The reason Hyundai Steel is undertaking restructuring is that the business conditions have worsened due to the downturn in upstream industries such as construction, automotive, and shipbuilding, and the internal and external management environment has become difficult due to rising raw material costs, leading to a significant deterioration in performance. Hyundai Steel recorded an operating loss of 147.9 billion KRW in the fourth quarter of last year. This was the first quarterly loss since it was incorporated into the Hyundai Motor Group in 2001. Last year's operating profit was 331.3 billion KRW, down 67.7% from 2018, and sales decreased by 1.3% to 20.5126 trillion KRW.

In response, President Andong-il is known to have set a policy to review the business overall, keep only the necessary sectors, and reorganize the rest to expand profitability. As part of this, the sale of the steel pipe division to its subsidiary Hyundai BNG Steel is under consideration. The sale of the steel pipe business was decided after consulting solutions last year. As of the third quarter of last year, Hyundai Steel's equipment utilization rate for steel pipes was only 63.3%, far below the utilization rates for cold-rolled (108.8%), thick plate (99.2%), and hot-rolled (89.1%) products.

Workforce adjustments will also be implemented at the China subsidiaries. This year, plans are being reviewed to unify the Beijing and Tianjin subsidiaries and consolidate the Zhejiang region subsidiaries into one. Additionally, the sale of Hyundai Steel's 2% stake in Hyundai Oilbank is also under consideration.

A Hyundai Steel official said, "Along with restructuring, we will expand profitability this year through product price increases and cost reductions," and added, "We expect to recover an average operating profit of 200 to 300 billion KRW in the second quarter of this year."

This content was produced with the assistance of AI translation services.