The sale of Dongbu Steel, the faltering steelmaking affiliate of South Korea’s Dongbu Group, is expected to be delayed as no visible candidates have emerged for the takeover deal.

Both POSCO and Hyundai Steel -- who were widely expected to bid -- have recently backed out, and its main creditor Korea Development Bank is facing difficulties in finding a suitable buyer.

KDB, in charge of the sale alongside Nomura Securities, has reportedly contacted companies overseas, including in China, without visible success.

Though the preliminary bidding for the Dongbu Steel sale had been scheduled for this month, industry watchers expect the company will likely remain under the bank’s ownership for a prolonged period.


“One of the most important considerations among steel companies this year is liquidity. One faulty decision could jeopardize the standing of the entire company,” a high-level steel industry official was quoted as saying.

“In such a situation, no company would easily decide to take over Dongbu Steel, ridden with debts totaling some 3 trillion won ($2.5 billion),” he said.

The main steel subsidiary of Dongbu Group was officially put on the market in October 2015, when it was placed under a debt workout program led by its creditors.

Though POSCO and Hyundai Steel had been widely expected to step forward to purchase Dongbu Steel, the top executives of both companies publicly stated they were not interested earlier this month.

Faced with its own financial burdens, POSCO is set to concentrate on streamlining its businesses and selling off some 70 of its poor-performing subsidiaries this year.

Weighed by excessive supply from its Chinese rivals and weak demand in the global steel market, the nation’s No.1 steelmaker POSCO is forecast to have posted a net loss in 2015 for the first time since its foundation in 1968.

POSCO’s net profit dropped from 1.35 trillion won posted in 2013 to 556.7 billion won in 2014, and is widely expected to further slump into the red in 2015, according to the firm’s regulatory filings.

Hyundai Steel, as well as other domestic steelmakers including SeAH Group and Donguk Steel, are likely to take on a similar trajectory, as they foresee difficult market conditions and shy away from making mega investments, including the purchase of Dongbu Steel, this year.

“A general downturn in the steel industry will likely continue for the time being,” said LIG Investment & Securities analyst Kim Yoon-sang.

“Falling global demand has led to the saturation of the steel export market,” Kim said, adding an oversupply of steel has led China to pull back its production while its steel exports continue to remain stalled.

By Sohn Ji-young (jys@heraldcorp.com)