At one time, integrated steel milling was commonplace among automakers. For decades, Ford Motor Company milled the steel for its vehicles at its Rouge facilities in Dearborn, Michigan.
The practice of integrating steel milling was long ago abandoned by most major automakers. India’s Tata Motors and Russia’s AvtoVAZ were the only exceptions until last Tuesday, when Hyundai-KIA, fired up the furnaces at their new steel mill in Dangjin, South Korea.
The new $5 billion mill is being operated by the company’s partner, Hyundai Steel Company, and will produce the steel used in both Hyundai and KIA brand vehicles.
Hyundai says it made the move as a way of ensuring its supplies of steel, including high-tensile steel, and protecting itself from fluctuating prices.
Hyundai spokesman Oles Gadacz said, We will be in absolute control of the quality and quantity of the steel we need, especially the high tensile steel that is needed to bring down the weight in the new generation of automobiles and make them safer.
Gadacz said that it has been difficult for Hyundai to purchase sufficient quantities of high quality, ultra-high tensile steel which is crucial to the company’s strategy of employing lighter, stronger steel to achieve higher fuel economy across their fleet.
Hyundai Steel metallurgists will work alongside Hyundai structural engineers and manufacturing specialists to develop the lightest, strongest and safest steel car bodies in the industry, Gadacz said.
Among the stakeholders in Hyundai Steel are Hyundai-KIA Automotive Group’s chairman Chung Mong-Koo, with a 12.6% stake, and KIA Motors Corporation, with a 21.4% share.
The Dangjin mill, located southwest of Seoul, will ultimately have two blast furnaces and an annual capacity of eight million tons. Last week, the facilities No.1 furnace was made operational with an annual capacity of four million tons. The company plans to have its No. 2 furnace online by early 2011.
The facilities will produce 225 unique types of steel from the hot rolled coil steel base product. Of the 225 types, 50 will be used in Hyundai-KIA’s automotive production.
Before bringing its first blast furnace online, Hyundai Steel used electric arc furnaces and recycled scrap metal to produce materials used in the construction industry. The new furnaces will use coking coal and iron ore to manufacture extremely high-quality steel suitable for use in vehicles, ships and electronic components.
Hyundai “KIA Automotive Group declined to say how much steel it will buy from the mill but indicated that the facilities will not satisfy 100% of the automaker’s needs.