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Korean steel furnaces face shutdowns, in risk to manufacturing

Posco and Hyundai Steel targeted by local governments over emissions

SEOUL -- One-quarter of South Korea's blast furnaces are facing 10-day shutdown orders across the country over environmental violations, threatening a linchpin of the country's industrial sector.

Local governments say pollutants are being released into the air during scheduled inspections at those furnaces. Leading steelmakers Posco and Hyundai Steel have contested the orders, arguing that they are acting within established industry practices. While immediate shutdowns are unlikely, they would disrupt South Korea's supply chains for months.

Following up on complaints by environmental groups, state broadcaster KBS looked into the matter and reported in March that Posco's Gwangyang works was discharging toxic gases.

Authorities in South Jeolla Province immediately inspected the site, where they discovered that the steelmaker opened safety valves, or bleeder valves, during routine inspections held six to eight times a year. In April, they ordered Posco to shut down the third furnace at Gwangyang for 10 days.

Normally, gases produced during the steelmaking process are filtered and reused as fuel. But bleeder valves lack this filtering mechanism, which meant that when Posco opened them during inspections to adjust internal pressure, a small amount of toxic gas was released into the atmosphere.

South Korean law requires blast furnaces and other facilities that produce air pollutants install equipment to prevent toxic releases. South Jeolla Province said Posco violated the law by opening unprotected valves.

Similar issues arose at other plants. South Chungcheong Province ordered Hyundai Steel to halt one of its three furnaces at the company's Dangjin works for 10 days, while Posco was hit with another 10-day suspension, this time for the second furnace at its Pohang works.

Three of South Korea's 12 blast furnaces face shutdowns. Hyundai Steel filed an appeal against the provincial order with the South Korean government June 7. Posco also argued against a closure during a hearing in South Jeolla on June 18.

Opening bleeder valves during inspections "is something furnaces around the world have done for over 100 years," the Korea Iron and Steel Association said.

"We do the same thing, but it's not against the law and we've never gotten in trouble for it," a source at a Japanese steelmaker said.

The impact of a suspension can be astronomical. A blast furnace is designed to operate continuously for decades. Once it is halted and the steel inside hardens, the metal needs to be removed through an explosion or some other painstaking process before the furnace can restart.

Getting a furnace back online "would take three to six months," according to the iron and steel association.

A three-month hiatus at one plant alone would dent production by 1.2 million tons and slash company revenue by 800 billion won ($692 million), the association estimates.

"Steel prices will go up and have an immeasurable impact on the industrial sector, including automobiles, shipmaking and electronics," an executive at a leading South Korean steelmaker said. South Korean steel is used in a range of products, from Samsung Electronics devices to Hyundai Motor vehicles.

South Korea's Environment Ministry has decided to step in. The ministry formed a panel June 19 consisting of representatives from provincial governments, the steel industry and environmental groups. The panel will determine the types and amounts of pollutants released through bleeder valves and propose improvements. Its report is expected in two to three months.

Bleeder valves release primarily water vapor into the air, the steel association says. The group claims that though harmful gases are part of the mix, the release is no more severe than running a car with a 2-liter engine eight hours a day for 10 days.

The panel's recommendations likely will serve as South Korea's new guidelines on blast furnaces. Big steelmakers in Europe and Japan, which use the same technique to run their furnaces, are watching the debate.

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