Hyundai Steel to displace Baoshan as GM Korea's supplier

Hyundai Steel Co. is poised to displace Baoshan Iron & Steel Co. as a key supplier to GM Korea Co., a unit of General Motors Co., as the US carmaker seeks to decouple from China in its supply chain amid the ongoing trade war between Washington and Beijing.

Hyundai will take over the full portion previously supplied by Baoshan, accounting for 20% of GM Korea's steel purchases, marking the largest shipment it has made to an automaker outside its affiliates Hyundai Motor Co. and Kia Corp.

GM Korea recently notified Baoshan of its decision to terminate its supply contract, according to steel industry sources on Wednesday.

Hyundai, the second-largest steelmaker in South Korea, is set to supply around 100,000 tons of steel sheet annually to GMKorean starting as early as September, said the sources.

The supply, valued at up to 180 billion won ($132 million) in sales, matches the volume previously provided by Baoshan, a unit of China’s state-owned Baowu Steel Group, the world’s largest steel manufacturer.

GM Korea has already initiated internal procedures for the supplier transition, including validation of steel products from Hyundai.

As Washington ratchets up pressure on Beijing with steep tariff hikes, GM is understood to have decided to source key parts and materials from outside China.

Earlier this year, the Trump administration imposed 145% tariffs on Chinese imports, although the rates were later reduced as the two sides entered trade negotiations.

GM Korea already procures 70% to 80% of its steel, excluding Baoshan volumes, from POSCO. With the latest move, the company is effectively completing its decoupling from China in its steel supply chain.

Conventional cold-rolled automotive sheet is priced at 1.1 million won per ton, while high-strength sheets sell for 1.8 million won per ton. The supply deal with GM Korea will generate additional revenue of 110 billion-180 billion won ($81 million-$132 million) annually.

Industry watchers said the supply deal could expand into a broader partnership between Hyundai Motor Group and GM as Hyundai plans to build a $5.8 billion steel mill in Donaldsonville, Louisiana. It will mark a major strategic investment in the US steel industry.

Separately, Hyundai Motor plans to invest $21 billion to expand its manufacturing in the US.

"The deal will likely pave the way for further partnerships, including GM sourcing steel from Hyundai Steel’s Louisiana plant,” said an industry source. “Their cooperation could extend to sharing production lines, or sourcing components from one another.”

In September of last year, Hyundai Motor Group Chairman Chung Euisun and GM CEO Mary Barra signed a memorandum of understanding for a comprehensive cooperation between the two companies.

The latest development marks the first tangible outcome of the agreement.

Write to Woo-Sub Kim at duter@hankyung.com
 

Yeonhee Kim edited this article.