POSCO resumes furnace operation, but full normalization takes more time

[Photo provided by POSCO]

South Korean steel giant POSCO’s three blast furnaces at the main steel plant in Pohang are back in operation Thursday after a first-ever week-long shutdown due to flooding caused by Typhoon Hinnamnor early this month but is expected to deal a huge blow to across-the-board industrial sites such as for electric vehicle traction motors and transformers due to the suspension of its rolling lines.

With the resumption, the steelmaking process of removing impurities from hot metal to create crude steel has mostly been normalized, according to the company on Thursday.

But it is impossible to produce a complete steel product as the rolling lines remain shut down in the aftermath of flooding. POSCO says its rolling line normalization will take three months from now, while the government and industry projected more time would be needed.

The shutdown of the country’s steel giant’s rolling lines is set to take a blow to a wide range of industries in the country because POSCO’s Pohang plant is responsible for a majority of finished steel products to be used in cars, appliances and buildings.

For example, non-oriented electrical steel is a key material for electric vehicle traction motors, the engine of a fuel-driven car, and its demand from the automotive industry was already much higher than the Pohang plant’s annual supply of 100,000 tons before the flooding.

POSCO Mobility Solution, which produces automotive motor core, warns that its inventory will dry up over a month. After then, it has to buy it from China’s Baoshan Iron & Steel or Japan’s Nippon Steel to avoid a delay in EV production schedule of its clients, finished carmakers.

But steel imports from China is no a wise solution because the U.S. imposes hefty tariffs on Chinese steel imports, which could make Korean cars or appliances using Chines steels more expensive in the U.S.

Non-oriented electrical steel currently is priced at above $2,000 per ton, nearly doubling from the $1,000 level in the first half of 2020 due to supply shortages.

Halted production of grain-oriented electrical steel will also make it impossible to continue expansion and replace work for transformers to prevent power overload during the winter season.

POSCO is the only steelmaker in the country that churns out more than 2 million tons of wire rods and stainless steel per year. Those steel products are widely used – from construction materials to metal springs for mattresses. Home appliance makers also would face with supply shortages of cold rolled and thick plate steels used in manufacturing refrigerators and washing machines.

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