In light of shipping and shipbuilding companies that are being swept up by debt after years of oversupply, Korea’s steel firms are seeking preemptive steps not to succumb to the same fate.
Industry watchers say the steel makers will likely hasten restructuring moves after summer when a new law that eases regulations on small mergers, splits and asset sales takes effect.
The act, dubbed the “one shot law,” would clear regulatory hurdles associated with tax codes, commercial code and fair trade law, among others, when companies in predefined “oversupplied” industries seek M&As or spin-offs.
The local association of steel companies has recently commissioned the Boston Consulting Group to review and evaluate the industry’s current state and expected future challenges. The findings will provide the basis for talks between industry players and the government as to whether the law should include steel makers as its beneficiaries.
“The report is expected to be out before August,” said an industry official.
The move comes as Korean steel firms struggle for survival in the face of a global supply glut, with no turnaround expected in the near future as demand from China and emerging economies is cooling.
POSCO, the nation’s No. 1 steel maker, last year sold off 34 subsidiaries at home and abroad and plans to put another 35 up for sale or into liquidation.
Hyundai Steel is in the process of streamlining its product portfolio to focus on those that are more profitable, such as steel sheets for cars.
Dongkuk Steel Mill, which last year sold off its headquarters building in central Seoul to Samsung Life for 420 billion won ($356 million), is currently in negotiations with Tong Yang Moolsan to sell its 50.8 percent stake in Kukje Machinery, Korea’s third-largest maker of agricultural equipment.
The fourth-largest firm Dongbu Steel is already deep in debt troubles. Creditor banks, led by the state-run Korea Development Bank, recently approved a 200 billion won debt-equity swap, throwing a lifeline to the firm at the brink of a forced stock market delisting. The creditors sought to sell their stake in Dongbu Steel twice since last year, but failed to draw interest from potential buyers.
By Lee Sun-young (milaya@heraldcorp.com)