By Jhoo Dong-chan
The nation's steel giants, POSCO Group and Hyundai Steel, have chosen Mexico as a strategic nation to expand their presence in the global market. A gateway for Latin America, directly south of the U.S., the world's largest auto market, Mexico has been considered to be an optimal production base for cold-rolled steel plates for automobile production.
According to officials at POSCO and the Financial Supervisory Service, Wednesday, POSCO-America, the group's affiliate in the U.S., acquired a local steel distributor and a human resources company in Mexico City last December. Both companies' assets were estimated at 55.7 billion ($48 million) and 79 million won, respectively.
Such a move is believed to be part of POSCO's efforts to boost the group's growth.
Since the group's chairman Kwon Oh-joon was appointed to the post in March 2014, the group has undergone large-scale reconstruction to improve its finances. The group sold a total of 34 affiliates at home and abroad last year and is expected to sell more of its remaining 35 units this year.
In the meantime, POSCO has opened four cold-rolled steel plants in Mexico over the last ten year. The annual production of the four plants combined now reaches 560,000 tons annually, and global auto makers such as Nissan, Honda, Mazda, Volkswagen and Ford are POSCO's major clients.
"A series of reconstructions and concentration on the cold-rolled steel operation in Mexico are part of the group's effort to maximize profitability and normalize its finances," said a POSCO official.
"Mexico is considered to be an ideal location for us because it is close to the U.S., the world's largest auto market. POSCO will continue reconstructing low-profit affiliates and focus on its operations in Mexico."
Hyundai Steel, an affiliate of Hyundai Motor Group, is also taking a similar approach in Mexico.
The company recently completed construction of its steel service center (SSC) in the northeastern Mexican city of Monterrey, gearing up for entering the Latin America market. After weeks of preparations, the SSC will start operations from the end of this month.
The operation of the SSC in Monterrey is part of Hyundai Motor Group's moves to expand its overseas production lines. The new SSC will enhance the group's auto production in Mexico.
The SSC in Mexico is expected to produce cold-rolled steel plates for around 400,000 cars every year.
Hyundai Steel invested a total of 53 billion won to build the SCC.
"The SCC in Mexico will supplement domestic production of cold-rolled steel plates that will make up half of the auto production in Korea," said a Hyundai Steel official.