POSCO Group is moving to sell its stainless steel plant in China, an effort initially established in 1997 to capture the Chinese market. This facility, capable of producing over 1.1 million tons of stainless steel annually, accounts for more than half of South Korea’s annual production. This decision comes in response to China’s push for steel self-sufficiency, leading to an oversupply situation. Consequently, this move is seen as a significant step in the business restructuring process declared by POSCO Group’s Chairman, In-Hwa Chang, who vowed to sell off unprofitable businesses.
According to the investment banking industry, POSCO Group has decided to sell its Chinese joint venture, Zhangjiagang Pohang Stainless Steel (PZSS), and has begun reaching out to potential investors. A leading domestic accounting firm has been appointed as the deal’s lead manager, with the sale price expected to reach approximately 500 billion Korean won. If selling the entire stake proves difficult, POSCO is considering selling 50% and then co-managing the company. POSCO Holdings and POSCO China currently hold 82.53% of PZSS, while China’s second-largest steel company, Shagang Group, holds the remainder.
The decision to sell PZSS comes after it incurred an operating loss of 169.8 billion Korean won last year, marking it as the most significant loss among POSCO’s 38 overseas subsidiaries. The outlook for the stainless steel market, mainly used in construction materials, isn’t promising amid China’s economic slowdown and oversupply issues.
From January to September this year, China’s 43 stainless steel firms produced 28.21 million tons, which exceeded the consumption of 24.17 million tons by 15%. A senior POSCO official noted that Chinese steelmakers have improved their competitiveness, causing PZSS to struggle in the market. Given the situation, POSCO judged it challenging to reverse the situation and decided to proceed with the sale.
The Zhangjiagang Pohang Stainless Steel plant was once regarded as a major success story in POSCO’s overseas expansion but has since lost its footing due to increased competition from Chinese firms and oversupply. POSCO officials stated that regaining competitiveness would require substantial capital for facility investment and that considering China’s overcapacity, selling the business was deemed the better option.
This sale is seen as a starting point for POSCO Group’s broader restructuring efforts, following the announcement of restructuring 120 units in July, including 51 low-profit businesses and 69 non-core assets. This year alone, POSCO plans to restructure 66 businesses and assets, with PZSS being the first overseas unit targeted. The industry expects more overseas units incurring large losses to follow suit. Out of POSCO Group’s 38 overseas subsidiaries, 13 reported losses last year.
Some speculate that the move also aims to avoid uncertainties stemming from U.S.-China trade tensions. With U.S. protectionism rising under Donald Trump’s administration and the potential for heavy tariffs on Chinese steel imports, concerns about tariffs impacting joint ventures like PZSS, in partnership with China’s largest private steel company, Shagang Group, have increased. POSCO’s long-standing partnership with Shagang Group, once hailed as a model of Korea-China cooperation, has become a liability amid the escalating U.S.-China trade tensions.
As these shifts continue, domestic and global companies that relied on Chinese stainless steel are gradually moving their production bases elsewhere, further reducing the incentive to retain large-scale operations in China. Major steel producers like Hyundai Steel and Dongkuk Steel are also joining the exodus from China.