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South Korean POSCO and Hyundai Steel in a Full-on Battle for Wire Market Share

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2017-07-10

Wires are a special steel material mainly used for bolts and nuts. Fastener companies buy POSCO's wires to make bolts and nuts and sell them to automotive and electronics makers. Previously the wire market had been monopolized by POSCO, but Hyundai Steel has started to produce wires as well. This divides the South Korean domestic market into two competing parties. 

In order to establish a vertical supply system for Kia Motors, Hyundai Steel set up a special steel company in Dangjin City at the end of last year producing a million tons of steel every year, among which 600 thousand tons are special steel and 400 thousand tons are wires. Hyundai Steel acquired patents for 44 types of steel at the beginning of this year. Hyundai Steel's move into the wire market means to compete with POSCO. POSCO retains its annual wire capacity at 2.8 million tons. Although Hyundai Steel's wire capacity at 400 thousand tons does not pose a big threat yet, POSCO cannot avoid domestic sales shrinkage because the volume that Hyundai Special Steel purchased from POSCO has disappeared.  

Previously Hyundai Special Steel had been buying 300-350 thousand tons of wires from POSCO every year. Last year 93.2% of Hyundai Special Steel's wires were purchased from POSCO. However, Hyundai Steel plans to replace wires bought from POSCO with self-produced wires. Among the 400 thousand tons of wires, 320 thousand tons will be supplied to Hyundai Special Steel, and the rest will be sold to other wire makers. This means POSCO will lose over 300 thousand tons of wire sales every year. POSCO already predicted that its wire supply would decline as soon as Hyundai Steel purchased Hyundai Special Steel. Therefore POSCO reacted by increasing the proportion of wire export.

However,  Hyundai Steel entering the wire market will be a pain in the neck for POSCO because Hyundai Steel is gradually making its way to the furnace, special steel and wire markets that are monopolized by POSCO.

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