As a result of unionized employees at South Korea’s second-largest steelmaker Hyundai Steel threatening to organise sit-in demonstrations, there is a growing concern that there will be an interruption in the supply of steel. The threats made by the employees come as pay discussions have stagnated at a crucial moment, when the country’s biggest steelmaker, Posco, is struggling to recover from the effects of a typhoon.
According to press sources from the industry that were published on Wednesday, the labour union for Hyundai Steel, which has been at the bargaining table since March, issued a threat to go on strike in the event that its negotiations with the management on Thursday are unsuccessful. According to what they indicated, 94 percent of the union’s members had voted in support of a walkout during the month of July.
The labour union is asking for an increase of 165,200 won ($118) in the basic monthly compensation of workers, as well as a share of 15 percent of operational profit in the form of incentives for workers. They noted that other Hyundai affiliates, such as Hyundai Mobis, had provided an additional 4 million won each worker as a special incentive in the past.
According to market experts, the timing of the union conducting a walkout is serious, and this is in reference to Posco’s battle to restore its damaged facilities in Pohang, which are located in North Gyeongsang Province as a result of Typhoon Hinnamnor. Due to the fact that steel production activities were halted as a result of electrical outages, it is predicted that Posco would lose around 2.04 trillion won ($1.5 billion) in sales until it is able to fully recover. The combined output of Posco and Hyundai accounts for more than half of the nation’s steel production. According to them, a disruption in the supply chain for either of the two steel manufacturers may have a domino impact on associated sectors such as car manufacturing, shipbuilding, and construction.
“As long as there is a continued uncertain supply of steel goods, the price increase of local steel materials will have an effect on other industrial sectors. According to a person familiar with the steel sector, “it also offers an opportunity to Chinese steelmakers who sell goods at considerably cheaper pricing.”
According to the Korea Iron & Steel Association, out of a total of 70.4 million metric tonnes of steel that was produced domestically in 2017, Posco made around 16.8 million tonnes, while Hyundai Steel manufactured approximately 19.2 million tonnes. The output volumes of the two companies together account for around 51 percent of the total steel produced in the nation.
As of the previous week, the retail price of steel sheets reached 1.1 million won per tonne, representing almost a 10 percent rise in comparison to the price in August. The wholesale costs of iron bars and stainless steel increased by 5 percent and 1 percent, respectively, over the last week when compared to the costs during the previous month.
In the meanwhile, Posco said on Wednesday that it is making an all-out effort to normalise production volume and anticipates that it will be able to begin delivering full steel products created from its Pohang facility within the next three months.
According to the representative representing the firm, Posco presently has two to three months’ worth of steel supplies in stock based on volume. Despite the very low likelihood of it happening, the official emphasised that steps will be taken to prepare for the possibility of an interruption in supplies.
Late in the week of the previous week, the People Power Party’s MPs in the National Assembly criticised the management of Posco for their lack of preparedness for the extensive damage that was inflicted at the Posco Pohang facility. This brought the topic of Posco to the forefront of the conversation. They made the assertion that Posco did not set aside 20 billion won to mitigate the effects of natural catastrophes, despite the fact that the corporation was aware of the need of doing so.
Posco Group Chairman Choi Jung-woo will be asked as a witness for a parliamentary inspection to assess the significant damages that were caused at the Pohang factory as a result of the typhoon, according to the Ministry of Industry, which echoed a similar stance and stated the same thing.