[THE INVESTOR] A merger between South Korea’s leading steelmakers POSCO and Hyundai Steel can further benefit the local steel industry to gain competitive edge in the global market, an industry report said.

“In response to the rapidly changing environment, industry-wide restructuring through mergers and acquisitions is necessary,” according to report released by the Export-Import Bank of Korea on the steel industry earlier this month.

“There’s a need to consider merging POSCO and Hyundai Steel. When two are combined, it will become the world’s third largest (by volume).”



The state policy bank cited Nippon Steel & Sumimoto Metal Corporation as a successful deal creating more profits while cutting costs. The company, which was formed in 2012 with the merger of Nippon Steel and Sumimoto Metal, is the third-largest steel producer in the world.

A recent report by the Boston Consulting Group also reached similar conclusions. The report, published on Sept. 18, proposed to cut the annual output of steel plates by 4 to 5 million from the current 12 million tons being produced. It also suggested to gradually close down three out of seven steel plate plants in South Korea, as the shipbuilding industry’s prolonged slump and a flood of cheap Chinese steel products have caused faltering demand for local steel plates -- mainly used to build ships.

By Ahn Sung-mi (sahn@heraldcorp.com)