SeAH Group, South Korea’s major steel group said to be a steel supplier to SpaceX, is set to make deeper foray into the US, the world’s biggest specialty metal market, with a $155.3 million investment to build a special alloy plant amid the escalating global space race.
SeAH Besteel Holdings Corp. announced in a regulatory filing on Thursday that its board approved a plan to spend $155.3 million in total to build a special alloy plant in the US, which would be the first of its kind to be built by a Korean company in the US.
SeAH Besteel Holdings will chip in $46.7 million to buy new 46,658 shares of SeAH Global Holdings Inc. to fully own the company, while its wholly-owned subsidiary SeAH Changwon Integrated Special Steel Corp. (SeAH CSS) will invest $108.6 million to own redeemable convertible preferred shares (RCPS) of SeAH Supperalloy Technologies LLC.
SeAH Global Holdings and SeAH Supperalloy Technologies are new entities set up in the US this year to build the specialty metal plant. The latter one is the special alloy manufacturing unit.
SeAH CSS manufactures high-tech industrial materials, including special alloys, and it joined SeAH Group after the latter acquired formerly POSCO Specialty Steel in 2015.
SeAH CSS manufacturing facilities in Changwon, South Gyeongsang Province
SeAH’s total investment in the US specialty metal manufacturing facilities is greater than SeAH Besteel Holdings’ consolidated operating profit of 196.7 billion won ($146.1 million) for 2023.
It plans to decide on the plant’s site in the US soon, the company said.
Once the factory’s construction is completed, it is expected to churn out 6,000 tons of special alloys annually, according to the company.
DEEPER TAP INTO THE US SPACE MARKET
The upcoming US special alloy manufacturing facilities are expected to enable SeAH to penetrate fast and deeper into the US space industry, which is the world’s No. 1 in space technology, with aerospace and defense household names such as Boeing Co., Lockheed Martin Corp., GE Aerospace and Pratt & Whitney.
Special alloys are high-performance metals made with a mixture of specialty materials such as nickel, titanium, cobalt and aluminum.
Demand for such specialty metals mainly comes from the aerospace, defense and space industries thanks to their high-temperature strength, toughness, corrosion resistance and weight.
Special alloy steel product (Courtesy of SeAH CSS)
While non-specialty steels are melted at 1,500 degrees Celsius, these specialty metals can withstand even temperatures of 1,900 degrees and higher.
They are the most high-value added metals among steel products, delivering higher margins to SeAH CSS than its mainstay products stainless steel and carbon alloy products.
Special alloys currently account for about 4% of SeAH CSS’s total sales, and its share is expected to jump once the new specialty metal plant is built in the US.
As of 2021, the US was the world’s No. 1 specialty metal market, accounting for 40% of global special alloy sales thanks to the global top-tier aerospace, defense and space companies based in the country.
According to Allied Market Research, the global special alloy market is forecast to more than double to $15 billion in 2031 from $6.8 billion in 2021.
BEYOND SPACEX
SeAH CSS also may be able to expand its specialty metal supplies to SpaceX after the new US factory is completed.
SpaceX in 2022 conducts a fire test of its super heavy-lift launch vehicle for Starship under development
The Korean high-tech industrial materials maker was rumored to be in talks with SapceX early last year to supply its specialty metals for SpaceX’s rockets and satellites.
An unnamed official in the industry said that SeAH CSS has reportedly started supplying its products to the US spacecraft company under Tesla Inc.’s Elon Musk.
SeAH CSS declined to confirm whether it has already bagged orders of such steel products from SpaceX.
SeAH Group set its foot in the US steel manufacturing scene in 2016 for the first time after SeAH Steel Holdings Corp. acquired a local steel pipe factory. The upcoming special alloy factory will be its second steel manufacturing plant in the US since then.
The upcoming plant is expected to ease uncertainties over US tariffs on Korean special alloy imports. The world’s largest economy does not impose tariffs on Korean special alloy imports now but it could change any time amid the ongoing trade rows between the US and China.
It is also expected to help reduce logistics costs and expand the network with US customers.
“The special alloy market has high barriers to entry as it requires advanced technology to manufacture,” said a SeAH official. “The company will expand its presence in the global specialty metal market centered around the US.”
SeAH Besteel Holdings stock added 2.9% to 24,550 won on Thursday.
By Hyung-Kyu Kim
khk@hankyung.com
Sookyung Seo edited this article.
