POSCO and Hyundai Steel Will Suspend Blast Furnace Production

POSCO and Hyundai Steel Will Suspend Blast Furnace Production

On June 5, the two largest steel companies in South Korea Posco and Hyundai received official documents from the provincial government in their region to shut down the blast furnace. Currently, the two companies are facing an unprecedented crisis.

Since the two major steel mills received surveys on exhaust emissions from various operating regions in April, the South Korean Jeollanam-do and Chungcheongnam-do government have informed Gwangyang Plant and Hyundai Plant on April 24 and May 16 Plant to shut down blast furnace for 10 days. On May 27, the government of Gyeongsangbuk-do in South Korea officially issued a notice to the Posco Factory. On May 30, the Chungcheongnam-do government confirmed the punishment measures for the Hyundai Steel factory, but the specific implementation time has not yet been determined.

It is understood that the exhaust gas discharged is used to prevent safety accidents during blast furnace maintenance. Otherwise, there will be danger of explosion or fire. The operation methods of the global blast furnace plants are basically the same. The steel plants can’t understand government’s action well. After receiving the notice, steel plants submitted comments and statements to the local governments and asked for a hearing.

In terms of impact, if the blast furnace is stopped for more than five days, the molten iron in the furnace will solidify, and the post-repair work will take 3 to 6 months. For example, the blast furnace with a capacity of 4 million tons per year of Hyundai Steel Tangjin Factory without production for more than 3 months, the sales loss will be about 800 billion won (US$679 million) according to the hot rolled price. At present, there are 12 existing blast furnaces in the South Korea’s Posco Gwangyang Plant, Posco Steel Works and Hyundai Steel Tangjin Plant (with a total annual production capacity of 50 million tons and South Korea’s 2018 crude steel output is 72.5 million tons). The use and production of the blast furnace are basically the same. The loss of Posco steel with nine blast furnaces will be more than three times that of Hyundai Steel.

Judging from the official documents issued by the government, the Korean government’s proposal to stop the production of blast furnaces is to make the factories correct the problem of exhaust emissions within ten days. If it is not resolved within the time limit, it will be subject to additional 30 days, additional licenses, etc. The key to the problem is that there is currently no technology that can solve the problem of exhaust emissions.

According to the people’s saying in the two major steel mills, in theory, the steel products produced by the hot metal of the blast furnace are higher in quality than the electric furnace products, and are generally used in all walks of life. Once the production is suspended, it is not just for the steel industry. Terminal industries such as automobiles, shipbuilding, construction, and home appliances will inevitably receive a series of shocks.

In automobile industry, except for some Japanese vehicles, most of the automotive steel in Korea is mainly supplied by Hyundai Steel and Posco. More than half of the automotive steel in Hyundai Motors comes from Hyundai Steel.

In shipbuilding industry, South Korea’s shipbuilding industry generally uses thick plates of 6mm or more. About 60% of shipbuilding boards come from Hyundai Steel, which accounts for about 20% of shipbuilding costs.

In home appliance industry, most of the galvanized steel and stainless steel used in the home appliance industry such as LG, Samsung, and Hyundai in Korea are from local blast furnace plants.

The Korea Iron and Steel Association also said that although the Korean steel production industry is currently at the world’s leading level, there is no other way to ensure safety except to open the venting valve to release water vapor and exhaust gas. The association is also actively looking for alternatives to solve the problem of blast furnace production.

From the perspective of steel supply and demand, South Korea exported about 31.06 million tons steel. The main export destination countries include China, Japan, Southeast Asia, Europe and the United States. Domestic demand is expected to be 53.3 million tons in 2019. If this measure is implemented, there will be a huge gap in domestic demand in Korea.