Dongkuk Steel Mill, the country’s third-largest steelmaker, is considering closing down a shipbuilding plate factory as part of its restructuring efforts, the company said Tuesday.
According to its regulatory filing, Dongkuk is reviewing a plan to stop its factory operation in Pohang, North Gyeongsang Province. The line has an annual production capacity of 1.9 million tons.
If the factory closes, it will follow the first plate mill’s closure in 2012, and only one plate mill with a 1.5 million-ton capacity in Dangjin, South Chungcheong Province, will be left in operation.
The move comes less than a month after the company decided to sell its headquarters building in Seoul to Samsung Life Insurance for 420 billion won ($389 million) to improve its financial status.
Dongkuk had enjoyed high sales of plates in thickness of 6-100 millimeters that are used for building offshore plants and vessels, but has gradually lost ground due to oversupply in the domestic market and low-cost Chinese products.
The sluggish shipbuilding market is another reason behind the firm’s struggle to keep the sale of its business on track, according to industry watchers.
According to the company’s earnings report, Dongkuk Steel saw its sales slump 9.3 percent on-year to reach 6.68 trillion won, while logging 20.4 billion won in operating losses.
In January, Dongkuk absorbed its affiliate Union Steel to improve its financial status and diversify the steelmaker’s portfolio, which covered both hot and cold rolled sheets.
But the company was recently hit by suspicions that its chairman Chang Sae-joo siphoned about 20 billion won from the company and habitually engaged in illegal gambling.
The scandal has also cast doubts over the firm’s mill construction project in Brazil, in which Dongkuk invested some 862 billion won as a stepping stone for the company’s revival.
