An Unprecedented Decision by Korea's Top Two Steelmakers Amid Shifting Trade Environment
Establishing a U.S. Production Base to Avoid 25% Tariffs
POSCO Completes the First Piece of Its "Complete Localization" Strategy
Hyundai Steel Eases Concerns Over Investment Funding
Comprehensive Collaboration Expected to Expand R&D and Raw Material Procurement
POSCO's decision to invest in a stake in Hyundai Steel's electric arc furnace steel mill project in Louisiana, USA, has drawn attention as it marks a rare alliance between South Korea's top two steelmakers. It is also notable that the industry is overcoming the tariff barriers imposed by the Trump administration in the United States through a strategy of cooperation.
The Memorandum of Understanding (MOU) for mutual cooperation in the steel and secondary battery sectors, signed by POSCO Group and Hyundai Motor Group on the 21st, centers on POSCO becoming a business partner by investing in Hyundai Steel's planned electric arc furnace steel mill in the United States. Hyundai Steel, a subsidiary of Hyundai Motor Group, plans to establish a steel mill in Louisiana with the goal of commencing commercial production in 2029, and POSCO will acquire a certain equity stake in this facility.
POSCO Group and Hyundai Motor Group signed a Memorandum of Understanding for mutual cooperation in the steel and secondary battery sectors on the 21st at Hyundai Motor's Yangjae office in Seoul. From the left, Seokwon Han, Head of Planning and Coordination Division at Hyundai Motor Group, and Jutae Lee, Head of Future Strategy Division at POSCO Holdings. Photo by POSCO Holdings
It is highly unusual for POSCO and Hyundai Steel, who have long been competitors, to decide to form a business partnership. Industry experts believe that several crisis factors surrounding the steel sector?such as oversupply and trade pressures?have played a significant role in bringing the two companies together. One industry insider commented, "President Trump seems to have played a major role," adding, "The collaboration of these two steel giants, who represent Korea, is highly significant for our industry."
This alliance is also significant as it represents the first tangible result of the "complete localization strategy" that POSCO Chairman Jang Inhwa has consistently emphasized since taking office. Chairman Jang has repeatedly outlined a blueprint to build a value chain that spans from securing raw materials to production and supply, all within the local market. The imposition of a 25% steel tariff by the Trump administration this year has made establishing a North American production base even more urgent. In this context, the partnership with Hyundai Motor Group is seen as enhancing the completeness of this strategy.
For Hyundai Steel, which must secure half of the $5.8 billion (approximately 8.5 trillion won) investment for the steel mill from external sources, POSCO's participation is a tremendous boost. Not only does the joint investment make it easier to raise funds, but it also enables Hyundai Motor Group to secure a more stable supply of automotive steel products. There is now an opportunity to apply the "Korean-style quality management system" to production lines in the United States as well.
Some observers note that this cooperation goes beyond a mere business partnership. By forming a joint front in the United States?a global demand hub and a focal point of trade risk?the two companies have established a platform to actively respond to the Trump administration's strengthened protectionist policies. The Louisiana steel mill to be built by POSCO and Hyundai Steel is expected to not only avoid the 25% steel tariff but also secure a strategic advantage in relationships with both the U.S. government and local companies.
The alliance is also expected to generate significant business synergies. POSCO will secure a stable customer in Hyundai Motor Group while gaining momentum to expand its strategy from a steel-centric business to future sectors such as secondary battery materials and mobility. In particular, by jointly establishing a local supply system in line with Hyundai Motor Group's expansion of electric vehicle production in North America, the two companies are expected to significantly strengthen their ability to meet future demand for battery materials and steel sheets for electric vehicles.
For Hyundai Steel, the partnership not only eases the burden of raising investment funds but also offers direct benefits by enabling the transfer of POSCO's quality management and production expertise to the U.S. market. Especially as Hyundai Steel moves beyond its domestic base focused on high-end products such as automotive steel, the North American production hub will serve as a springboard for its transformation into a "global steelmaker."
This alliance also has considerable potential to expand into additional areas of cooperation, such as long-term supply contracts, joint research and development (R&D), and joint procurement of raw materials. Observers predict that the impact will be substantial, as the partnership is expected to go beyond a simple equity investment and establish a comprehensive collaboration system in areas such as technology, procurement, and distribution.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
