Decadeslong rivals partner up for 1st time overseas to brush off tariff woes in US
Hyundai Motor Group and Posco Group, longtime industry rivals, have joined forces in a strategic alliance abroad, specifically in the US, a key market pressured by steep 25 percent tariffs on steel and automobiles.
Hyundai Motor said Monday that it aims to create synergy with the steelmaker by securing a supply chain for key raw materials for electric vehicle batteries. Meanwhile, Posco seeks to create a foothold in the North American market, where the auto giant plans to set up a new auto steel facility.
Earlier in the day, executives from both companies, including Han Seok-won, head of the planning and coordination division at Hyundai Motor Group and Lee Joo-tae, head of the future strategy division at Posco Holdings, attended the signing ceremony for the partnership agreement at Hyundai Motor Group’s Seoul headquarters in Gangnam.
As part of the steel alliance, Posco Group is considering investing a stake in Hyundai Steel, Hyundai Motor’s steel manufacturing arm’s electric arc furnace manufacturing plant in Louisiana and exploring ways to directly sell the partial production volume.
The $5.8 billion facility, set to start commercial operations by 2029, has the annual capacity to manufacture 2.7 million metric tons of hot and cold-rolled auto steel sheets. Posco intends to leverage the strategic location of the production base -- which is near Hyundai Motor’s Alabama plant, Kia’s Georgia plant and the newly opened Hyundai Motor Group Metaplant America in Georgia -- to supply Hyundai, Kia and other US automakers.
Aiming to sell over 3.26 million battery-powered vehicles annually by 2030, Hyundai Motor plans to secure key rechargeable battery supply chains in partnership with Posco. The steelmaker’s subsidiaries, including Posco International and Posco Future M, produce lithium hydroxide and anode and cathode materials for EV batteries by sourcing lithium resources through ownership and equity investments in overseas salt lakes and mines.
Hyundai Motor stressed the importance of establishing a stable and diversified supply chain for battery raw materials amid the escalating geopolitical risks -- volatile trade policies and supply chain restructuring in the US, EU and other regions.
“Through the strategic partnership with Posco Group, we will expand business opportunities in global markets, including the US, while solidifying the foundation for sustainable growth and leadership in electrification within the future mobility sector,” stated a Hyundai Motor Group official.
The carmaker also hinted at an R&D partnership for next-generation battery materials. While it did not disclose specifics, it was reported that Hyundai Motor, which has set up a pilot production line for all-solid-state batteries, is considering sourcing the battery materials from Posco.
Experts say that the unprecedented alliance between Posco and Hyundai Steel, South Korea’s top 1 and 2 steelmakers, signals an all-hands-on-deck response to counteract the 25 percent tariffs imposed by US President Donald Trump.
“This partnership marks a significant shift from the traditional competition between the two companies,” said Kim De-jong, a business professor at Sejong University. “Although Posco has held a stronger foothold in the steel industry, its willingness to work with Hyundai Steel shows that desperate times call for desperate measures. Joining hands with its rivals is ironically the only viable option for Korean companies to improve the cost efficiency of relocating their production facilities to the US.”
Notably, Posco, which operates two steel processing sites in Alabama and Indiana, has long mulled over constructing a steel mill that handles upstream processes from melting raw steel to producing intermediate products in the US. Its previous plan for a hot and cold-rolled plant in Alabama was scrapped due to high labor costs.
For Hyundai Steel, Posco’s stake investment is a lifeline as it faces cost pressures from the Louisiana project. Considering that Hyundai Steel’s cash and cash equivalents were approximately 1.3 trillion won ($917 million) at the end of last year, the company would be allocating nearly all of its cash reserves to this Louisiana project, which reportedly requires 1 trillion - 2 trillion won from the steelmaker. To secure funding for the US base, it recently began negotiations with Dongkuk Steel, Korea’s third-largest steel manufacturer, to sell off Hyundai IFC, its steel forging subsidiary.
hyejin2@heraldcorp.com
