A 100,000-Ton Annual Contract Signals New Partnership
Benefiting from Supply Chain Diversification Amid US-China Tensions
Hyundai Steel has decided to break away from its affiliate-centered supply structure and will supply Korea GM with 100,000 tons of automotive steel sheets annually. Excluding Hyundai Motor and Kia, this is the largest single-factory supply volume for a global automaker.
According to the steel industry on June 12, Hyundai Steel is expected to begin supplying automotive steel sheets to Korea GM as early as September. The company has already started practical preparations, including quality certification. The annual supply volume is expected to be about 100,000 tons, which will fully replace the volume that Korea GM previously sourced from China’s Baoshan Iron & Steel. Considering the market price of 1.1 million won per ton (for general cold-rolled steel) to 1.8 million won per ton (for high-strength steel), the contract is estimated to be worth between 110 billion and 180 billion won.
The background to Hyundai Steel being selected as Korea GM’s new supplier appears to be a result of changes in GM Group’s global supply chain strategy. In response to the prolonged US-China trade conflict, GM is accelerating efforts to source key materials such as steel outside of China. The US government has also recently raised tariffs on Chinese steel and aluminum to 50%, applying strong pressure. Although steel used in automobiles is exempt from these tariffs, it is interpreted that GM chose Hyundai Steel as an alternative supplier to China’s Baoshan Iron & Steel, taking into account the strained relationship between the US and China. A Hyundai Steel official also stated, “It seems that GM is concerned about supply chain risks, and Korea GM is also trying to diversify its supply sources.”
For this contract, Hyundai Steel has been developing products and obtaining certifications that meet GM’s quality standards for several years. Currently, over 90% of its automotive steel sheet products have passed GM’s quality certification. Notably, this contract was pursued independently by Hyundai Steel, not at the Hyundai Motor Group level, and the industry sees this as evidence of Hyundai Steel’s technological and quality competitiveness.
Korea GM produces models such as the Trax Crossover and Trailblazer at its Incheon Bupyeong Plant, with more than 85% of these vehicles being exported to the US market. The possibility of high penalty tariffs being imposed in the US if Chinese steel is used was also a major factor in the decision to change suppliers.
Since entering the automotive steel sheet market in 2010, Hyundai Steel has relied on Hyundai Motor and Kia for over 80% of its total supply volume. This contract is significant as it marks Hyundai Steel’s first major supply contract with a global customer outside its group affiliates.
Some industry observers interpret this contract as a potential signal for Hyundai Steel to expand its supply in North America in the future, given that the company is currently building an electric arc furnace-based integrated steel mill in Louisiana, USA. However, while there is a possibility that this contract could lead to further expansion in North America, the prevailing industry view is that there is currently no direct connection with the Louisiana plant.
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