Two steel players listed on SGX have teamed up with the steel export arm of Posco, one of the world’s largest integrated steel producers.
Yesterday, HG Metal, Novo Group and POSCO Steel Service & Sales ("Posteel") inked a JV agreement to distribute “offshore grade” steel products to the offshore oil & gas and marine sector.
HG Metal is Southeast Asia’s largest steel stockist while Novo Group is a global trader that supplies raw materials to steel mills and other end users, distributing products ranging from iron ore to rolled coils.
With an initial issued capital of US$2 million and to be known as POS-SEA, the JV opens a new chapter for HG Metal and Novo Group as dealing in high-end steel is a first both traders.
Offshore structures are in general built for the drilling of oil and gas in deep seas. Hence, steel used for such structures are subject to strict safety standards.
In particular, the special grade high tensile strength steel that POS-SEA will distribute can withstand extreme temperatures in harsh environments such as the icy North Sea.
Steel plates for all offshore structures, including module walls, topside hulls, FPSOs, and jack-up rigs will mostly be produced by Posco, while HG Metal and Novo Group will support in logistics and warehousing.
Being South Korea’s largest steel producer, Posco has played a key role in the fourth-largest Asian economy’s dominance over the global shipbuilding industry.
”Having the support of a large steel mill is most critical to our success in distributing high tensile strength steel,” said the CEO of HG Metal, Mr Wee Piew during yesterday’s media conference.
”Only 5 steel mills in the world can produce this type of high tensile strength steel,” said Novo Group’s executive chairman, Mr Dicky Yu. Other than in South Korea, the special grade steel is also produced in Europe, as well as in Japan by Nippon Steel and Sumitomo.
Supply may be limited, but there is great demand for the product, according to Mr Yu.
And POSCO is very competitive for this type of high tensile strength steel model, which is currently not available in Southeast Asia.
Even the large China steel mills like Angang and Baogang do not produce this special grade of offshore platform plates, he said.
The leading Korean steel mill wants to better serve customers by having its own distributor in Singapore, right at the hub where offshore yards are located, and the JV allows it to tap onto HG and Novo’s distribution networks here.
Partnership brings conveniences such as the use of HG Metal’s warehousing facilities here. It also allows the JV to provide steel on project-basis, which is how yards normally do their procurement.
For example, a rig project needs one hundred items, and POSCO can supply 70%. The remaining 30% will need to be sourced from outside Korea by using distributors like HG Metal and Novo.
The JV partners are confident their high tensile strength steel trade will enjoy better margins than the distribution of normal steel.
Posteel will hold 51% in POS-SEA while HG Metal and Novo will each hold 24.5%.