Hyundai Steel to Resume Steel Manufacturing Activities in Russia

South Korea's Hyundai Steel Co. is poised to recommence steel production operations in Russia, marking a return after a hiatus of two years when its plant in the country was shut down amidst the conflict between Russia and Ukraine. This turmoil eventually led its automotive counterpart, Hyundai Motor Co., to offload its factory to a Russian entity.

Hyundai Steel has opted to revive its automotive steel sheet plant located in St. Petersburg, which has remained inactive for approximately two years. The decision follows a request by AGR Automotive Group, a subsidiary of Art-Finance LLC, which acquired the former Hyundai Motor plant in the same city for a nominal fee of $100 in December. Under the new ownership, Hyundai Motor's former plant recommenced operations in late February to manufacture vehicles under the brand Solaris.

Presently, the plant is utilizing steel inventories on-site to manufacture sedans, crossovers, and crossover hatchback vehicles. However, the impending depletion of these inventories necessitates a fresh supply of steel sheets, with Hyundai Steel expected to fulfill this requirement. The resurgence of operations at the plant is anticipated to bolster Hyundai Steel's steel sales, particularly amidst a period of sluggish demand in the industry.

In 2023, Hyundai Steel's operating profit witnessed a significant decline, halving to 807.3 billion won ($605.2 million) compared to the previous year, amidst a 5.2% dip in sales, totaling 25.9 trillion won. The Russian plant had previously been a lucrative venture, generating an annual net profit of approximately 5 billion won ($3.7 million). However, it incurred losses following the shutdown of Hyundai Motor's plant in Russia in March 2022.

As a part of the Hyundai family conglomerate, Hyundai Steel heavily relies on its sister companies, Hyundai Motor and Kia Corp., for steel sales. Additionally, Hyundai Wia Corp., another sibling specializing in auto parts and components, has reportedly received orders from AGR to supply engines. Although Hyundai Wia possesses a plant in Russia capable of producing engines for 280,000 cars annually, the plant remains inactive. While AGR has indeed placed engine orders, Hyundai Wia is yet to decide on reopening its Russian facility, citing that AGR's orders fall short of the plant's maximum production capacity.

AGR's acquisition spree also includes Volkswagen's local plant, acquired last year after the German auto giant exited the Russian market in 2022. When Hyundai Motor divested its Russian plant, it retained an option to repurchase the assets at the sale price within a two-year timeframe.