Hyundai Steel Co., South Korea's No. 2 steelmaker, on Thursday started full production of its first-ever integrated blast furnace in the southwestern coastal city of Dangjin after a three-year construction period, increasing its capacity at a time when steel demand is rising.
The steelmaker began partial production at the blast furnace in January this year, allowing Hyundai Steel to produce higher value products such as plates used for ships and automotives as it competes with bigger rival POSCO.
Hyundai Steel, a unit of top automaker Hyundai Motor Group, has spent a total of 6.23 trillion won (US$5.55 billion) on the furnace with an annual production capacity of 4 million tons.
The steelmaker is also constructing a second blast furnace at the integrated mill. Once finished, the mill will churn out a total of 8 million tons of steel products annually, including 6.5 million tons of hot-rolled steel sheets.
Following the completion of the second blast furnace, Hyundai Steel expects to have an annual capacity of around 20 million tons.
Hyundai Steel said earlier it plans to build a third blast furnace by 2015, which will increase its total annual production capacity at the mill to 12 million tons.
The expansion by Hyundai Steel came at a time when economic recovery is boosting demand for steel from builders, carmakers and home-appliance makers. POSCO plans to raise production by 17 percent this year.
POSCO, which has an annual capacity of 33 million tons, was the only South Korean mill to make steel from blast furnaces, which burn iron ore and coal. Hyundai Steel had operated only electric furnaces that produce some 11 million tons of steel annually using scrap metal.
Steel used for construction accounts for around 70 percent of the company's sales.
Hyundai Steel took over the facility from the now-defunct Hanbo Iron & Steel Co. in 2004. Building an integrated steel mill is known to have been a long-time goal of Hyundai Group since the days of its late founder Chung Ju-yung.
Previous attempts in 1977, 1994 and 1997 were unsuccessful due to difficult economic conditions and the vast amount of money needed.
Hyundai Motor Group, which owns the nation's two largest carmakers, is expected to be one of the key beneficiaries of the mill, as its production will secure a stable supply of steel for auto manufacturing.
Hyundai Steel chief executive officer Park Seung-ha said in January the furnace will be able to produce around 3.8 million tons of steel this year after full operation begins.
Although POSCO, the country's leading steelmaker and the world's fifth largest, supplies about 40 percent of South Korea's steel needs, the country must still import the remainder as POSCO had been the only local steelmaker to run an integrated steel mill.
South Korea is the world's sixth-largest steelmaking country, but still buys 20 million tons of steel products from overseas, mainly China and Japan. In 2008, the country imported 28.94 million tons of steel. Last year, South Korea bought 20.6 million tons of steel products from overseas rivals.
According to Hyundai Steel, the furnaces are expected to replace $8 billion worth of steel imports a year.
For the year, Hyundai Steel is targeting 9.19 trillion won in sales, up 15.3 percent from a year earlier, and aims at selling 12.13 million tons of steel products, also up 22.3 percent over the cited period.
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