POSCO–Nippon Steel ‘Iron Alliance’ Nears Conclusion, Both Turning to Survival Amid Domestic Industry Crises

POSCO Raises $238 Million Through Sale of Nippon Steel Stake
Nippon Steel Also Unwound POSCO Stake Last Year
Cross-shareholding Alliance Between Korean and Japanese Steelmakers Set to End

POSCO Holdings is moving to end its half-century-long “iron alliance” with Nippon Steel. The historic partnership that laid the foundation of Korea’s steel industry is entering its final stage as both sides unwind their equity ties. Market observers interpret the move not as a rupture but as a pragmatic adjustment, with both firms seeking survival strategies under a shifting global landscape. The era of fraternity is over, and the age of competition on separate terms has begun.

POSCO Sells Half of Nippon Steel Stake via Block Deal

According to the investment banking industry on the 25th, POSCO Holdings offloaded 7.85 million shares—half of its 15.69 million Nippon Steel shares (about 1.5% stake)—through a block deal after market close the previous day. The shares were sold at a discount of 1–2.5% to the closing price of $21.50, with UBS and Bank of America acting as lead managers.

The transaction is expected to generate approximately $238 million in cash for POSCO Holdings, based on the exchange rate as of the 24th. Industry analysts anticipate that the company will soon dispose of its remaining Nippon Steel shares via another block deal. Once completed, the long-standing cross-shareholding between the two steel giants will effectively come to an end.

The two firms established their equity ties in 1998, when POSCO was privatized, and deepened them in 2006 when POSCO Holdings acquired 1.5% of Nippon Steel and Nippon Steel took a 3.42% stake in POSCO Holdings. However, the alliance began to fray last year when Nippon Steel, in pursuit of its U.S. Steel acquisition, liquidated its entire 3.42% stake in POSCO Holdings for about $838 million.

Korea and Japan Move to Shield Domestic Steel Industries

Nippon Steel’s aggressive dumping practices have further strained the relationship. According to the Korea Iron & Steel Association, between January and December 2023, Nippon Steel exported hot-rolled coil to Korea at prices averaging $208 lower per ton than Japan’s domestic prices—about 25.4% cheaper.

For instance, in January 2023, domestic Japanese hot-rolled coil averaged $998 per ton, while export prices to Korea were just $551 per ton—a 44.8% discount. Although falling Japanese steel prices narrowed the gap later in the year, the disparity still exceeded $160 per ton on average. Industry voices note that such a price gap, even accounting for the usual one-to-two-month lag between domestic and export prices, is highly irregular.

In response, Hyundai Steel, Korea’s second-largest steelmaker, filed an anti-dumping petition with the Ministry of Trade, Industry and Energy late last year. Initially targeting Chinese imports, the company expanded the complaint to include Japanese products as well. According to the association, Korea imported 3.43 million tons of hot-rolled coil last year, of which 1.53 million tons came from China and 1.77 million tons from Japan, together accounting for 96% of total imports. Japan has since launched its own anti-dumping probe into Korean steel exports following petitions filed in April by Nippon Steel, Kobe Steel, and other local producers, citing weak domestic demand and competitive pressure from cheap imports.

POSCO Aims to Raise $1 Billion in Cash, Closes Two Plants

Another motivation behind POSCO’s divestment is liquidity. The company announced in its half-year earnings that it had completed 11 restructuring deals in the first half of the year, generating about $262 million in cash. It aims to raise an additional $1 billion in the second half to strengthen its balance sheet.

POSCO has been reeling under cheap steel exports from China and Japan, and last year shuttered two facilities at its Pohang works—the No.1 steelmaking plant and the No.1 wire rod mill—due to mounting pressure. The global wire rod market has a production capacity of 200 million tons, but demand amounts to just 90 million tons. China, with a capacity of 140 million tons, has been offloading excess supply at cut-rate prices, driving global prices downward.

Meanwhile, POSCO’s exports to the U.S. have been hit hard by punitive tariffs, and domestic demand has slumped amid a construction downturn. As a result, the iconic Pohang works posted its first-ever loss since its founding in 1973, in stark contrast to the mass-production model of the Gwangyang works, which focuses on automotive steel. An industry insider warned, “The next five years will be a golden time that will determine the survival of Korea’s steel industry. Without drastic restructuring to cut low-value production and expand specialty steel, the entire sector faces existential risk.”

Compounding these challenges, Nippon Steel’s acquisition of U.S. Steel significantly bolsters its position in the North American market, potentially eroding Korean producers’ competitive footing. With equity ties now unwound, the shift from cooperation to direct competition between the two nations’ flagship steelmakers is becoming increasingly pronounced.