Raising Prices and Cutting Unprofitable Businesses... Hyundai Steel's Q1 Profitability Improvement Background (Comprehensive)

Q1 Operating Profit 303.9 Billion KRW... Turned to Profit Year-on-Year
Price Increase for Shipbuilding and Automotive Reflecting Raw Material Cost Hikes
Strengthening Sales Network and Increasing Sales of High-Value-Added Products Planned

Appearance of automotive steel sheets produced at Hyundai Steel Dangjin 2 Cold Rolling Mill. Photo by Hyundai Steel

[Asia Economy Reporter Choi Dae-yeol] Hyundai Steel announced on the 27th that its consolidated operating profit for the first quarter of this year turned to a profit of 303.9 billion KRW compared to the same period last year. Sales increased by 5.6% during the same period to 4.9274 trillion KRW, with an operating profit margin of 6.2%.

The company explained that the significant improvement in profitability was largely due to price increases received from major customers. Despite rising raw material prices in recent years, steel demand industries such as shipbuilding and automotive have been sluggish, preventing the company from receiving appropriate prices. However, price hikes this year have helped improve profitability.

Regarding thick plates mainly used by shipbuilders, the company stated during a conference call that price negotiations were concluded last month, reflecting increases in raw material costs such as iron ore. They are currently awaiting final results after proposing price increases for products mainly used by automakers, such as cold-rolled steel. Additionally, profitability improved due to the withdrawal and sale of high-cost product lines as part of business rationalization last year. Hyundai Steel exited the color steel sheet business and sold old thin hot-rolled facilities last year.

The company explained, "With the global steel market improving, product prices centered on sheet products have risen, and sales of high value-added products have increased," adding, "This is the result of actively responding to increased steel demand centered on advanced countries and domestic markets as the global economy enters a recovery phase."

According to industry sources, domestic distribution prices for hot-rolled and thick plates are formed in the low 1 million KRW range. Hyundai Steel recently established an integrated order management organization and plans to strengthen sales capabilities by enhancing competitiveness in bidding for social overhead capital (SOC) related projects. They are achieving results in projects such as the Incheon Airport expansion and the Dongbuk Line light rail.

Photo by Hyundai Steel

Amid results somewhat exceeding industry expectations, the company stated during the conference call that there are many positive factors expected after the second quarter as well. For special steel, profitability is expected to improve significantly this year due to fixed cost reductions and price increases. Rebar, which has recently seen favorable market conditions, is also expected to steadily rise through 2023. Regarding thick plates, which have seen some price increases, the company hinted at the possibility of additional negotiations in the second half of the year as iron ore prices have risen further since last month's negotiations.

The company also clearly stated its intention to increase sales of high value-added products in the shipbuilding and automotive industries. They plan to increase steel grade development according to demand changes and enhance product competitiveness through technical cooperation with customers. The company raised its global automotive steel sheet sales target from 690,000 tons last year to 820,000 tons this year. In line with the trend toward electric vehicles, they also plan to invest in expanding lightweight materials. The hot stamping line at the Czech subsidiary, currently at about 3.2 million sheets, is planned to be increased to about 4.8 million sheets by March 2023.

This month, the company is also working on internal capability efficiency by introducing a business unit system. They simplified the decision-making system by changing from the existing function-based organizational structure to one centered on business units such as blast furnaces and electric furnaces. Additionally, they have developed 1.5GPa-class ultra-high-strength cold-rolled steel for electric vehicle body parts and 9% nickel steel that can withstand cryogenic temperatures of minus 196 degrees Celsius.

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