Hyundai Steel Issues Statement on 'Pohang Plant Crisis' to Reassure Employees

Indefinite Suspension of Pohang Plant 2... Company Calls It "A Decision for Survival"
Statement to Employees... "We Will Do Our Best to Ensure Job Security"
Possibility of Renewed Union Opposition... Growing Concerns Over Labor-Management Conflict

Hyundai Steel has implemented an indefinite suspension of operations at its Pohang Plant 2 in Gyeongbuk and is now taking steps to reassure its concerned employees.

On June 12, Kim Pankun, head of Hyundai Steel's Pohang plant, addressed employees in a statement, saying, "Our company, and especially the Pohang plant, is facing the greatest crisis since its founding," and added, "The closure of Plant 2 and the sale of the medium section business division were unavoidable decisions made for the survival of the Pohang plant and its employees."

In February this year, a banner expressing employment insecurity of the Hyundai IMC union, a subsidiary of Hyundai Steel, was hung in front of Hyundai Steel Pohang Plant 2 in Jangheung-dong, Nam-gu, Pohang-si, Gyeongbuk. Photo by Yonhap News

Hyundai Steel has completely halted operations at Pohang Plant 2 since June 7, citing a slump in steel demand. At the time, the company stated, "We plan to smoothly discuss whether to resume operations in the future through negotiations with the union." However, industry insiders noted that, given the strong opposition from the union to last year's closure decision, the possibility of renewed conflict could not be ruled out.

Hyundai Steel also attempted to close Pohang Plant 2 in November last year due to worsening steel market conditions. At that time, fierce opposition from the union led the company to withdraw the decision and instead opt for downsizing the plant. However, continued global demand stagnation and a slump in the construction sector have since pushed the company to proceed with restructuring measures, including selling the medium section business division.

Kim also described the current situation as "the greatest crisis since the company's founding" in his statement. He said, "The bar and section steel division recorded its largest-ever losses in both the fourth quarter of last year and the first quarter of this year, and domestic demand for steel is also plummeting." He added, "As the decline in competitiveness across the Pohang plant has become prolonged, the sustainability of the business now faces a serious crisis."

Kim further explained, "Domestic demand for section steel dropped sharply from 3.37 million tons in 2022 to 2.97 million tons in 2023, and is expected to fall to 2.46 million tons this year," adding, "Plant 2 is now facing structural limitations that make it difficult to expect normal operations." He continued, "The company is making every effort to secure competitiveness for survival and job stability amid ongoing oversupply and a prolonged demand slump."

This statement is seen as an attempt to preemptively address employees' job insecurity and dissatisfaction. Kim emphasized, "We will make job security for our employees our top priority," and pledged, "We will minimize the difficulties that arise during workforce redeployment and grievance processes, and prepare support measures." He also appealed, "We ask for your mutual understanding and cooperation as we promptly share the company's financial and business decisions."

Some in the industry view this statement as a step by the company to minimize employee unrest ahead of restructuring and to secure legitimacy in future negotiations with the union. An industry official commented, "The company may have taken this measure not simply as a temporary suspension, but as a prelude to restructuring the medium section business," and analyzed, "The core message of the statement is to make it clear that 'the entire plant is at risk if things continue as they are.'"

Hyundai Steel's operating profit last year was 314.4 billion won, a 60.6% decrease from the previous year, and it posted operating losses for two consecutive quarters from the fourth quarter of last year to the first quarter of this year. In addition, a combination of factors?including increased steel tariffs imposed by the United States, expanded supply from China, and a downturn in the domestic construction market?has made large-scale business downsizing inevitable.

Hyundai Steel is currently accelerating its overseas strategy, including the construction of an electric arc furnace steel mill in Louisiana, USA, with an investment of $5.8 billion (about 7.8688 trillion won). However, most analysts believe it will take considerable time to address the structural weaknesses of its domestic business segment. A company official stated, "If the situation does not improve even during the suspension and further action is required for the facilities, we will proceed smoothly through consultation with the union."