SOUTH KOREA: In-house steel gives Hyundai an edge
'In-house' mills are giving Hyundai Motor an advantage developing new, lighter weight body materials to reduce weight and increase fuel efficiency.
Automakers generally shy away from having their own steel mills due to the huge investment required.
However, the Hyundai Group also includes Hyundai Steel.
"Every major [automobile] manufacturer wants to have steelmaking in-house but the investment is just too huge," Cho Won-suk, Hyundai Steel's senior executive vice president, told the Financial Times.
"Nobody else out there can invest that amount but Hyundai made the decision to enhance quality."
The company is looking to develop special alloys that will eventually help it reduce the weight of its cars by 10% by 2015.
Having in-house supply means the carmaker can reduce its dependence on external suppliers such as Nippon Steel and Posco.
Hyundai Steel has invested US$8bn in three blast furnaces in the last five years. Two have started production since 2010 with a third set to come online in 2013.
The two plants currently supply 30% of the carmaker's requirements but that will reach 45% once the third plant is producing steel.
Cho said in-house furnaces allows the company to develop customised steel for individual vehicle models.
However, Hyundai Steel has been affected by high iron ore prices and fluctuations in the value of the Korean won.
Kim Kyung-joong, an analyst at Eugene Securities, was optimistic.
"It is positive that Hyundai Steel has stable customers in Hyundai and Kia. The whole group can expand fast thanks to the steelmaking unit but it could also have had more room for investment in auto manufacturing if [it] had not moved into steelmaking," Kim said.