Hyundai Steel Company said it would close its Incheon stainless steel plant in South Korea at the end of the year and exit this market segment altogether in response to growing competition from Chinese suppliers and declining sales to Hyundai Motor and Kia Corporation.

The move came after the company scaled back operations in China due to fast rising competition from local suppliers as well as weak HMG demand.

The Incheon plant near Seoul produced 100,000 tonnes of stainless steel last year, or only half of total capacity.

Hyundai Steel, a unit of Hyundai Motor Group (HMG), was understood to have already informed its labour union of its decision and made plans to transfer workers to other plants once the factory is shut at the end of the year.

Hyundai Steel sold its stainless steel exclusively through its Hyundai BNG Steel subsidiary after transferring sales rights early in 2022.

Hyundai BNG, which operates its own stainless steel plant in Changwon, recently decided to stop selling stainless steel made by Hyundai Steel.

A Hyundai Steel official said: “We were notified by Hyundai BNG Steel that they will not place orders for stainless steel with Hyundai Steel after September. Because we have no other sales channels, we have decided not to produce any more stainless steel. We will focus on high end products such as automotive steel plates instead."

Last month, Hyundai Steel agreed to sell its Chinese steel plant in Chongqing to an unnamed buyer, following an earlier decision to sell its operations in Beijing.

HMG vehicle sales in China had fallen sharply since 2016 after South Korea agreed to deploy the US Terminal High Altitude Area Defense System (THAAD) on its territory.