The background to Hyundai Motor Group and POSCO Group's (POSCO Holdings) decision to build a close cooperative relationship in the steel market, where they competed for dominance, is said to reflect Chairman Chung Eui-sun's commitment to making complete vehicles with the best materials. This aligns with POSCO Group's interests, which found a desperate need for entry into the U.S. market for sustainable growth.

Hyundai Motor Group and POSCO Group signed a memorandum of understanding (MOU) for comprehensive business cooperation in areas such as steel and secondary battery materials on 21st. POSCO Group plans to invest in equity in the electric arc furnace steel mill being built by Hyundai Steel in Louisiana, and is also considering a plan to sell some quantities directly.

Chung Eui-sun, Chairman of Hyundai Motor Group, attends the completion ceremony of 'Hyundai Motor Group Metaplant America (HMGMA)' in Ellaville, Georgia, USA, on the 26th of last month (local time), signing a commemorative signature on the produced Ioniq 5 vehicle. Hyundai Motor Group decides to build a steel mill in nearby Louisiana. /Courtesy of Hyundai Motor.

The Louisiana steel mill is expected to supply steel plates to Hyundai's Alabama plant and Kia's Georgia plant, as well as the Hyundai Motor Group's eco-friendly vehicle dedicated plant, Meta Plant America (HMGMA), which can produce more than 300,000 electric and hybrid vehicles annually. This steel mill, which Hyundai Motor Group is constructing in the U.S. for the first time since its establishment, will require an investment of $5.8 billion (about 8.33 trillion won).

POSCO has gained the opportunity to enter the U.S. market, a long-held ambition, through this collaboration with Hyundai Motor Group. It is also possible to secure volumes not only from Hyundai and Kia but also from other complete vehicle corporations.

According to industry sources, the two groups have been conducting discussions to establish a cooperative relationship since forming a task force (TF) in May last year. Chairman Chung Eui-sun, who had been contemplating materials for complete vehicles and batteries, wanted to partner with POSCO, the leading steel company, and Chairman Jang In-hwa, who struggled with performance due to an inability to enter the U.S., responded to this, leading both groups to prepare for collaboration for nearly a year.

The appearance of the outbound work progressing at the 2nd blast furnace of POSCO's Pohang steelworks. /Courtesy of POSCO.

Chairman Chung reportedly expressed that if high-quality steel plates can be provided to make complete vehicles, there is no need to insist on independent technology. Hyundai Steel gained attention in the industry by appointing CEO Ahn Dong-il, who had worked at POSCO for over 30 years, in 2019.

Ahn has been credited with elevating quality during his four years leading Hyundai Steel until 2023. However, many analyses suggest that Hyundai Steel has not fully caught up with POSCO's technology. Chairman Chung has a strong attachment to top-quality materials, even considering the establishment of a Chief Material Officer (CMO) position within the group.

POSCO's method of melting iron ore in a blast furnace accounts for 94% of its total production. In contrast, Hyundai Steel's main focus is on producing steel by melting scrap metal in electric arc furnaces. While the electric arc furnace method has the advantage of lower carbon emissions compared to the blast furnace method, it is viewed as having lower product strength. Currently, POSCO operates nine blast furnaces, but Hyundai Steel has only three blast furnaces, having introduced them since 2010.

While Hyundai Steel focuses on producing automotive steel plates for Hyundai and Kia, POSCO is a company that has completed a value chain, supplying all battery materials from raw materials to anode and cathode materials, along with various types of steel products. Significant synergy is expected if Hyundai Motor Group partners with POSCO.

The construction site of the battery materials factory in Becancour, Quebec, Canada, for the joint venture Ultium Cells between POSCO FUTURE M and General Motors (GM). /Courtesy of POSCO FUTURE M.

POSCO was also in a deep quandary before partnering with Hyundai Motor Group. Unlike Hyundai Motor Group, which has a global network, POSCO has faced difficulties in entering overseas markets, leading to stagnation in growth.

POSCO Group has been striving for a long time to enter the U.S., the world's largest complete vehicle market, but it has been difficult due to not receiving construction permits for blast furnaces. POSCO operates networks in 46 locations across 16 countries, but it has only one subsidiary in North America, located in Mexico.

As a fallback, POSCO has been focusing on entering India but has yet to secure even a site. With the collaboration with Hyundai Motor Group enabling its entry into the U.S., there are expectations of improved performance in the global market by securing major clients.

An industry source said, “Chairman Jang has been a ‘traditional POSCO man’ who has worked for POSCO for over 30 years, and from the moment he took office, he has been working hard to enter the U.S. With this collaboration with Hyundai, he has achieved the foundation for the company's long-term growth.”