Aiming to optimize the management efficiency of its steelmaking business, Hyundai Motor Group decided to merge Hyundai Steel and the cold rolled steel sheet division of Hyundai Hysco, officials said Thursday.

The merger after divestiture was confirmed in both companies’ directorate meetings on Thursday morning, at last ending the rumors that had boosted the steelmaker’s stock prices over the past months.

“The merger is to create a synergy effect with our recently-completed blast furnace and thus complete the group’s integrated steel business blueprint,” said an official from Hyundai Steel.

Last month, the nation’s second-largest steelmaker held the opening ceremony for its third blast furnace in Dangjin, South Chungcheong Province.

The new furnace will produce some 12 million tons of crude steel per year, among which 4 million tons is to be used in building steel sheets for premium automobiles of Hyundai Motor and Kia Motors.

By absorbing the affiliate’s cold rolled steel sheet manufacturing line, the nation’s second-largest steelmaker will encompass all of the crucial stages required to produce car-related steel sheets, the official said.

Hyundai Hysco, minus its cold rolled steel business, will in the future focus on producing special-purpose steel pipes for transporting oil and gas.

It will also boost efforts in research and development to lighten car components, officials said.

Industry observers noted that the integration will especially be of help to Hyundai Steel which had been burdened by the additional furnace operation amid a sluggish market.

With the new Dangjin furnace kicked off, the steelmaker’s total debt increased to some 11 trillion won ($10.3 billion), according to Hyundai Steel officials.

By Bae Hyun-jung (tellme@heraldcorp.com)