Hyundai Steel to supply 100,000 tons of auto steel sheets to GM Korea
Hyundai Steel, the automotive steel manufacturing subsidiary under Hyundai Motor Group, is set to supply steel sheets to GM Korea as early as September, following the automaker's strategic decision to shift its supply chain away from China.
According to reports on Friday, GM Korea recently informed China's Baoshan Iron & Steel that it would be switching its steel sheet supplier. The company is carrying out quality certification processes before receiving the materials, estimated at 100,000 tons annually and representing 20 percent of its yearly consumption, from Hyundai Steel.
This is Hyundai Steel's first deal involving a significant volume, valued at approximately 110 to 180 billion won ($80.3 million-$131.5 million) in sales revenue, with an automaker other than Hyundai Motor Company and Kia. Since entering the auto steel market in 2010, it has relied on Hyundai Motor and Kia for over 80 percent of its supply volume.
Industry insiders indicate that GM Korea's supply reshuffle comes after GM's strategy to decouple from China for key materials such as steel in light of the ongoing trade war between the US and China. Following the recent agreement with Hyundai Steel, GM Korea will now use Korean-made steel across its entire vehicle lineup.
'Although Chinese automotive steel is exempt from the recent 50 percent tariffs imposed by the US government on China-made steel and aluminum, the carmaker appears to have chosen Hyundai Steel to mitigate supply risk concerns arising from tensions between the two countries,' said an industry source on condition of anonymity.
GM Korea manufactures models, including the Trax Crossover SUV and Trailblazer SUV, at its Bupyeong plant in Incheon, with over 85 percent of production exported to the US market. The source added that there is also a potential for the US to increase tariffs on cars that use Chinese steel.
This partnership is also part of the broader alliance formed last year between Hyundai Motor Group and GM, where Hyundai Motor Group Chairman Chung Euisun and GM CEO Mary Barra agreed to collaborate on key strategic areas in the automotive sector. These include sourcing steel and raw materials for batteries as well as joint development and production of passenger and commercial vehicles, internal combustion engines, and electric and hydrogen systems.
Experts say Hyundai Steel and GM Korea's new business ties could pave the way for a revamped collaboration between the steelmaker and GM in the US.
'Hyundai Steel is constructing an electric arc furnace-based steel mill in Louisiana, not far from GM's Tennessee plant,' said Kim Pil-su, a car engineering professor at Daelim University. 'As the car manufacturer is pushing to expand production in the US, it could leverage China-free auto steel sheets from Hyundai Steel.'
On Wednesday, GM shared its plans to invest $4 billion over the next two years to increase vehicle production at its plants in Michigan, Kansas and Tennessee. The company expects that this expansion will allow it to produce more than 2 million cars annually in the US.
In March, Hyundai Motor Group announced that Hyundai Steel looks to invest $5.8 billion to set up its first overseas production base in the US. With commercial production slated for 2029, the steel manufacturing plant's annual capacity is expected to be 2.7 million tons. This facility will specialize in steel sheets for electric vehicles.
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