Creditors of South Korea’s Dongbu Steel Co. may face a setback in their plan to sell off the cash-strapped company’s electric furnace used for hot-rolled steel production to an Iranian steelmaker amid concerns that the U.S. could walk out a nuclear deal with the Middle Eastern country.
Creditors had planned to sign a final agreement with Iran’s South Kaveh Steel Co. that was selected as preferred bidder by September at the latest but main creditor KDB has been putting off the plan.
If further delayed, the deal could fall through and make the creditors renew the auction process. Such scenario would upset subsequent plan to sell Dongbu Steel’s Incheon plant.
According to multiple sources from the steel industry on Monday, KDB will soon announce the result of negotiations involving the sale of Dongbu Steel’s electric furnace used for hot-rolled steel production at its Dangjin plan in western Korea.
An unnamed official familiar with the matter said that the result would take account of not only economy-related issues, but also political factors.
According to Dongbu Steel, Iran’s Kaveh Steel was selected as preferred bidder over others as it proposed the highest purchasing price of 120 billion won ($106.2 million). However, some creditors are nervy of selling a core steel production facility to an entity based in Iran with uncertainties over the nuclear deal that could affect the easing in international sanctions.
Moreover, Korea must stay in tune with the U.S. policy at a time when it relies on close bilateral alliance and concerted actions against North Korea.
An unnamed official from Dongbu Steel said that once final agreement is signed, Kaveh Steel would take home the entire electric furnace from the Dangjin plant.
The official added that creditors are carefully reviewing whether an electric furnace facility would be included in a list of banned strategic materials exported to Iran.
According to the Ministry of Trade, Industry and Energy, Kaveh Steel could be one of the companies that require attention when exporting strategic goods. Even if an electric furnace facility is not included in the list of banned goods exported to Iran, permission would still be needed from Korea’s trade ministry if there are concerns that Kaveh Steel or a defense company may use hot-rolled product churned out from the electric furnace in developing weapons of mass destruction.
By Moon Ji-woong and Lee Eun-joo
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]