Korean heavy industries maintain ties with China despite U.S.-China tension

2023.05.26 11:45:01 | 2023.05.26 13:51:14

A worker at the China Suzhou Processing Center (POSCO-CSPC) in Kunshan, Jiangsu Province, China operates cutting facilities for giga steel. [Photo provided by POSCO]이미지 확대

A worker at the China Suzhou Processing Center (POSCO-CSPC) in Kunshan, Jiangsu Province, China operates cutting facilities for giga steel. [Photo provided by POSCO]



Korean companies involved in the heavy and energy sectors are opting to maintain their partnerships with their Chinese counterparts to take advantage of the nature of their business-to-business transactions, which are relatively less sensitive to geopolitical trends such as the power struggle between the U.S. and China.

According to industry sources on Thursday, POSCO Group has completed the construction of a processing facility specialized in ultra-high strength, light weight steel sheets, also known as giga steel, at its China Suzhou Processing Center (POSCO-CSPC) in Kunshan, Jiangsu Province. Giga steel is an essential material for electric vehicles thanks to its light weight.

Established in 2003, POSCO’s Suzhou plant is the group’s largest automotive steel processing complex, with a cumulative sales volume of 8.97 million tons. With the latest addition to the facilities, the plant is now equipped with specialized cutting facilities for giga steel that can process 135,000 tons per year.

POSCO is also expecting the completion of another factory HBIS Puxiang Car Plate Co., a joint venture on automotive steel sheets between POSCO and steelmaker HBIS Group Co., by the end of this year. HBIS Puxiang has a current annual production capacity of 450,000 tons.

Once completed, the new plant in Tangshan, Hebei Province, is expected to triple POSCO’s total production capacity of galvanized steel there by adding 900,000 tons per year. Galvanized steel sheets are currently being sold for around $700 per ton in China. Using the current price for calculations, the new plant’s annual capacity is worth about 840 billion won ($634 million).

Korean fuel cell maker Doosan Fuel Cell Co. is also taking the necessary steps to establish a joint venture in China with ZKRG Smart Energy Technology Co., following their agreement in November to jointly aim for the Chinese hydrogen fuel cell market. Doosan Fuel Cell recently added export/import of fuel cell components to its business purpose of its articles of incorporation during a shareholders’ meeting. The inclusion is part of steps needed for the joint venture, according to the company.

The 346.9-billion-won deal signed in November will be recognized as sales revenue for Doosan Fuel Cell starting in the second quarter. Under the deal, Doosan Fuel Cell agreed to provide hydrogen fuel cells of 105 megawatts (MW). Starting in the second quarter, 50 MW will be delivered as finished goods by 2024 and 55 MW as parts by 2026. Since Doosan Fuel Cell posted 49.8 billion in sales in the first quarter, a significant improvement is expected in its performance starting this quarter.

LS Group’s LS Electric Co. is also in the China, signing a memorandum of understanding with delegates from the city of Wuxi, Jiangsu Province, for a $100 million investment to expand its facilities at an industrial complex there. LS Electric’s Wuxi plant produces power equipment for domestic Chinese markets.

LS Electric’s sales in China have been strong, posting 116 billion won in the first quarter, up 36 percent, or 30.7 billion won, compared with 85.3 billion won in the earlier quarter.

“China accounts for the highest proportion of Korea’s exports. While seeking diversification of export destinations in the long-term, active entrance into Chinese markets in the short-term is necessary,” said Professor Kim Dae-jong at Sejong University.

According to data from the Bank of Korea, exports to China in the first quarter topped $29.51 billion, accounting for 19.5 percent, which is the largest share in the first quarter based on customs clearance. Compared with the same quarter a year before, however, exports to China fell by 29.8 percent, leading to a current account deficit of $4.46 billion in the first quarter.

By Kim Hee-su and Chang Iou-chung

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