Dongkuk Steel to Start Operations at Second Mexico Plant in H2... Targeting North American Home Appliance Market

Production of Color Coated Steel and Galvanized Steel... Operations to Start as Early as October
Rising Domestic Demand for Home Appliances in the US... Targeting Exports of Steel Materials for Home Appliances

[Asia Economy Reporter Hwang Yoon-joo] Dongkuk Steel is set to complete its second factory in Mexico in the second half of this year, establishing it as a forward base for expanding exports to North America. This marks the company's first overseas investment in nine years since 2013. The strategy is interpreted as targeting the high-value-added steel market amid increasing demand for home appliances in North America.

According to industry sources on the 19th, Dongkuk Steel plans to complete its second coil factory in Mexico as early as October, producing color steel sheets and galvanized steel sheets. The site contract for the second factory in Mexico has been finalized, and equipment orders have been completed. The factory equipment consists of one slitter and one shear. The investment amount is approximately 14 billion KRW. Most of the products manufactured here are planned to be exported to the North American region.

This investment was made to secure a 'JIT (Just in Time)' supply base for North American exports. As demand for home appliances in North America has significantly increased, the demand for steel products, a downstream industry, has also risen accordingly.

In the case of LG Electronics, the overseas sales ratio of new home appliances was 40% in 2020 but increased to 55% as of the third quarter of last year, surpassing the domestic ratio. This is thanks to the increased demand from overseas consumers for hygienic appliances such as dishwashers and stylers after COVID-19. Particularly, the expectation is heightened by the fact that the North American home appliance demand during the boom period from 2011 to 2015 is approaching a replacement cycle. At that time, the shipment growth rate of home appliances in North America reached 4.5%. Considering that the average lifespan of home appliances is around 10 years, the replacement demand period is arriving. This is why Dongkuk Steel is establishing a second factory in Mexico following the first factory in 2008.

The establishment of the second factory in Mexico is part of Vice Chairman Jang Se-wook's 'DK Vision 2030' announced last November. 'DK Color Vision 2030' aims to expand color steel sheet sales from 1.4 trillion KRW in 2020 to 2 trillion KRW by 2030 and to increase sales bases to 8 cities in 7 countries. The strategy is to leverage its number one domestic market share (35%) in color steel sheets to expand overseas exports.

The expansion of overseas exports of color steel sheets reflects Dongkuk Steel's management policy to strengthen profitability. The price of color steel sheets ranges from 1.3 million to 2.5 million KRW per ton, with margins 2 to 3 times higher than general products.

An industry insider said, "Steel companies are focusing on high-value-added steel products," adding, "It can be interpreted that Dongkuk Steel, which entered the color steel sheet market first, intends to also secure a leading position in overseas markets."