A Hyundai Steel furnace (Courtesy of Hyundai Steel)
South Korea’s Hyundai Steel Co.
has sold its subsidiary in Chongqing, China to further scale back Chinese
operations as it is losing ground to low-cost local rivals, amid declining
sales by Hyundai Motor Co. and Kia Corp. in
the neighboring country.
The steelmaking arm of the Hyundai Motor Group has signed a memorandum of
understanding to sell the Chinese subsidiary to an unidentified local company,
according to sources familiar with the matter on Tuesday.
The deal followed the sale of Hyundai Steel’s Beijing arm in
the first quarter of this year.
Each of the Beijing and Chongqing units have a book value of 82 billion won
($61 million).
The latest deal may accelerate the steelmaker’s withdrawal from China, where
its three remaining units in Jiangsu, Tianjin and Suzhou have accumulated
losses. Industry observers said they could be put up for sale later on.
Hyundai Steel Dangjin Steel Mill in South Chungcheong Province
Since the early 2000s, Hyundai Steel had set up Chinese
subsidiaries in tandem with increasing automotive sales of Hyundai and Kia: one
each in Beijing in 2003; in Jiangsu in 2006; Tianjin in 2011; and in Suzhou in
2012.
Last year, all its five Chinese subsidiaries, including the Beijing arm, posted
losses, including shortfalls of 27.6 billion won at the Tianjin unit, 7.3
billion won at the Jiangsu unit and 573 million won at the Suzhou unit.
The Chongqing unit, established in 2015, processes cold-rolled steel manufactured
in South Korea and supplies them to Hyundai and Kia.
Losses at the Chongqing unit snowballed to 15.6 billion won last year, even
after it received 10 billion won in fresh capital from its parent company
through a rights offering in 2020.
Coupled with the Chinese steelmaker’s growing market share thanks to low-priced
products, both Hyundai Motor and Kia have taken a heavy battering from China’s
import restrictions on South Korean products in retaliation for the deployment
of the Terminal High Altitude Area Defense (THAAD) in South Korea in 2016.