Hyundai Group shelves giant steel plant project

Hyundai Group shelves giant steel plant project

SEOUL (AFP): South Korea's giant Hyundai Group said yesterday that it had put a US$6 billion steel project on ice, citing economic retrenchment required in return for the country's massive International Monetary Fund (IMF) bailout.

"We have decided to suspend the project for a while because of various difficulties under the IMF. It is not a total cancellation," a Hyundai official told AFP.

The move marked the first suspension of a major project by one of South Korea's top conglomerates, known here as chaebol, whose rapid debt-financed expansion is partly blamed for the country's financial crisis.

The group had planned to spend some $6 billion over the next five years to build a major steel mill on the southeastern coast despite government reluctance and concerns over a possible steel market glut.

Hyundai, the country's largest carmaker and shipbuilder which consumes three million tons of steel annually, had complained about prices charged by the giant state-run Pohang Iron and Steel Co..

Founded in 1968, POSCO is the world's second largest steel manufacturer after Japan's Nippon Steel Corp., with annual production capacity of 24.3 million tons, or 70 percent of South Korea's total steel output in 1996.

Hyundai's decision to break into the steel-making business had contributed to international credit ratings agencies lowering POSCO's and South Korea's debt ratings.

The suspension came after President-elect Kim Dae-Jung pushed for reforms of the country's bloated family-run conglomerates.

He has urged the all-embracing chaebols to spin off subsidiaries unrelated to their core business lines, reduce debts, stop cross-subsidiary financing and make their operations, and their book keeping, transparent.