Korean Steel Industry Advised to Reduce Number of Steel Plate Plants by Half

According to steel industry sources on September 18, the Boston Consulting Group (BCG) released an interim report that three out of seven steel plate manufacturing facilities of Korean steel firms should be shut down in phases. Previously, the Korea Iron & Steel Association (KOSA) picked the BCG to write up a report about restructuring plans for the steel industry. 

A steel plate is a steel sheet 6mm thick which is generally used to build ships. In Korea, POSCO runs four steel plate production plants while Hyundai Steel operates two and Dongkuk Steel operates one plant, respectively. The combined production capacity of these seven facilities stands at 12 million tons.

The report said that the steel plate business, which was once boosted by a boom in the shipbuilding industry, is now suffering from a decrease in demand and a flood of cheap Chinese products. Accordingly, the longer domestic firms run their steel plate production plants, the more losses they would see. It also predicted that the demand of steel plates would drop from 9.2 million tons last year to 7 million tons in 2020.

As the amount of orders received by Korean shipbuilding companies is expected to be down by half by 2020 compared to last year, the current production capacity should be reduced by 4 million to 5 million tons. Accordingly, one of its steel plate manufacturing facilities should be closed down by the end of this year, while another two should be phased out, according to the report. 

The BCG plans to send in the report to the KOSA and businesses, collect opinions and release a final report.

However, the report can be revised since it sparked the industry’s opposition. In particular, when three out of seven steel plate production plants are shut down, as the report insists, companies need to cut down about 1,000 employees.