Hyundai Steel Co., the country's No. 2 steelmaker, said Thursday that it plans to merge with an auto steel sheet-making division of its affiliate, in order to cut costs and improve profitability.

Hyundai Steel said its board of directors approved a merger with Hyundai Hysco Co.'s cold-rolled steel-making division on Dec. 31, the company said in a regulatory filing.

Currently, Hyundai Steel, a unit of Hyundai Motor Group, supplies steel sheets to Hyundai Hysco, which processes them into steel sheets used for making cars.

The planned merger is expected to help reduce the steelmaker's financial costs.

Hyundai Steel has some 11 trillion won ($10.3 billion) worth of debts and has to pay around 300 billion won in interest on those borrowings per year.

Last month, Hyundai Steel put its third blast furnace with an annual capacity of 4 million tons of crude steel into operation, greatly increasing its output capacity.

Hyundai Steel's integrated steel mill, now equipped with three blast furnaces, will be able to churn out a total of 12 million tons of crude steel annually. When including its electric furnaces, which can also produce 12 million tons of the metal, Hyundai Steel would be able to churn out 24 million tons of crude steel a year.

With the planned merger complete, Hyundai Steel's sales are expected to top 20 trillion won this year. Last year, Hyundai Steel's annual sales reached 14 trillion won. (Yonhap News)