POSCO Pulls out of Magnesium Business

Posted on 08 April 2019

Source: Business Korea

POSCO has decided to pull out of the magnesium business after 13 years of investment. The group has suffered a steady loss due to erroneous demand forecasts and it has been continuously facing environmental problems, such as greenhouse gas emissions and soil pollution.

Recently, POSCO has internally started seliberation on the sale of its magnesium sheet plant in Suncheon, South Jeolla Province, according to steel industry sources and POSCO on April 7.

POSCO began investment in magnesium production and smelting in early 2000 as part of its push for new material businesses. Magnesium took center stage as a new ultralight future material at that time. Magnesium weighs only 65 percent of aluminum and 22 percent of steel but it has a higher degree of rigidity and heat conductivity and can intercept electromagnetic waves as well. Therefore, there was the outlook that demand for magnesium for cellphones, laptops and frames of cars would rapidly surge.

POSCO invested about 90 billion won (US$79.09 million) to build its magnesium sheet plant in the Haeryong Industrial Complex in Suncheon in 2007 before mobile devices, including smartphones, became popular and also completed its magnesium smelting plant with a production capacity of 10,000 tons in Okgye, Gangneung, in 2012.

However, the rosy outlook was miles out. Instead of  magnesium alloys, aluminum alloys were widely used. Magnesium materials failed to take root in the information technology (IT) sector. In addition, the materials for smartphone bodies recently changed to glass through aluminum rather than magnesium alloys.

It is also the same story at the car market. There were expectations that more and more magnesium materials would be used for car bodies in order to meet stronger regulations on fuel efficiency around the world. However, aluminum and steel materials, including super high strength steel sheets, replaced magnesium materials. Magnesium is light in weight but there were limits to use it for mass production cars as it requires harsh duty processes for post treatment because of corrosion. Furthermore, POSCO’s magnesium business faced a bigger crisis as China, which accounted for 80 percent of the total magnesium production across the world, controlled the supply of its raw materials.

Environmental problems also played a part. The magnesium smelting plant in Okgye, Gangneung, leaked toxic substances, including phenol, and poisoned the soil in 2013. As a result, POSCO decided to close down the business. Above all, magnesium emits carbon dioxide (CO2) in the process of production and emits a considerable amount of greenhouse gases by using sulphur hexafluoride (SF6) in the casting process. So, it often becomes the target of environment groups. 

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