Hyundai Group’s Steel Plan Splits Nation : South Korea: Proposal to build $10-billion mill fuels debate over the need for industry competition.

South Korea’s Hyundai Group has a history of stirring up public opinion. In the 1992 presidential election, its founder, Chung Ju Yung, caused a political earthquake by mounting a highly charged campaign against the eventual winner, President Kim Young Sam.

This time around, the nation’s largest conglomerate is dividing the country with an ambitious plan to build South Korea’s second steel mill at a cost of $10 billion.

Some industrialists and analysts favor the plan, which is for an integrated steel mill with annual production capacity of nearly 10 million tons. These people say South Korea’s fast economic growth will require an equally fast increase in steel production capacity.

But others worry about a worldwide glut in supply by the time Hyundai’s steel mill is completed.

More fundamentally, the debate centers on whether competition is needed for the Korean steel industry, currently monopolized by Pohang Iron & Steel Co. (POSCO). POSCO is the world’s second-largest steel producer, after Japan’s Nippon Steel Corp.

The debate started a few weeks ago, when speculation about the plan first spread. It became hotter this week, as most Seoul newspapers presented a detailed construction plan, quoting Hyundai executives and government officials.

According to the reports, Hyundai will invest $10 billion to build three blast furnaces with a capacity of 3.1 million tons each, possibly in the southeastern city of Pusan. Hyundai officials were quoted as saying the group’s construction, engineering and heavy equipment subsidiaries will take 39 months to build the plant once they start.

Park Il Kwon, a Hyundai Group spokesman, refused to confirm the reports but said the group’s steel-product manufacturing subsidiaries, including Hyundai Pipe Co., have carried out some feasibility studies.

These include long-term projections of Hyundai’s own steel demands, he said.

Analysts say Hyundai’s steel needs for its car, shipbuilding, construction and electronics subsidiaries are estimated at 6 million tons a year, making it feasible for the group to have its own steel mill.

“It is no secret that we have hoped to have our own steel mill ever since POSCO was created in the late 1960s,” Park said.

With annual capacity of about 21 million tons, POSCO is perhaps the world’s most competitive steelmaker, because its plants are among the most advanced.