Scrap metal fixing steelmaker penalty bomb… 300 billion won in 7 companies including Hyundai Steel

A penalty bomb of KRW 300 billion was dropped on seven domestic steelmakers on suspicion of fixing the purchase price of iron scrap (scrap iron), a raw material for steelmaking products.

The Fair Trade Commission announced on the 26th that it was revealed that seven steelmakers, including Hyundai Steel and Dongkuk Steel, had artificially adjusted prices through collusion in the iron scrap purchase market from 2010 to 2018.

Penalties for each steelmaker are Hyundai Steel 9,985 billion won, Dongkuk Steel 499.21 billion won, Korea Steel 49.616 billion won, Y Case Steel 4,498 billion won, Daehan Steel 3,453 billion won, Korea Steel 3,337 billion won, Korea Special Steel 6 It is 38 million won.

In particular, the FTC plans to decide whether to file a prosecution through additional deliberations on matters such as the eligibility of the accused, along with corrective actions of the order to prohibit conduct, prohibition of information exchange, and education order.

The iron scrap market is operated in a way that is delivered to steelmakers through’collectors (small prizes), which collect scrap metal → medium-sized dealers → supply dealers (accounting companies), which collect scrap metal.

Iron scrap is scrap iron that has been sorted and processed by collecting by-products and waste steel products generated during the production and processing of steel products.It is not produced as the main raw material for steel products, but is generated and collected, and is supplied immediately even if demand increases in the short term. There is a characteristic that is difficult to stretch.

As a result, steelmakers pay a purchase price plus incentives and transportation costs to the internally determined iron scrap purchase base price, and then purchase iron scrap.

At this time, steelmakers change the steel scrap purchase base price and notify the account company whenever there is a change in the steel scrap price, and the change in purchase base price applies equally to all steel scrap grades.

The iron scrap market is a chronic excess demand market where domestic supply is less than the amount of demand, and the purchasing competition is fierce among steelmakers.When a specific steelmaker raises the purchase base price to secure inventory, the amount of iron scrap is concentrated on the relevant company, making it difficult for other steelmakers to secure inventory As a result, a competitive price hike could be triggered.

For this reason, seven steelmakers jointly decided on the fluctuation range (raise, decrease, and maintenance) of the base price for iron scrap purchases from 2010 to 2018 and the timing of the change. This collusion was led by Hyundai Steel and took place in two regions, including Yeongnam and Gyeongin, according to the locations of the seven steelmakers.

The Yeongnam region collusion, which all seven companies joined in, was achieved through the purchasing team leader meeting and the exchange of important information between the purchasing team practitioners.After the 2016 FTC Busan office field investigation, the purchasing team leader meeting was refrained from exchanging important information more secretly. Continued collusion in a way.

-Maintaining security for collusion facts thoroughly’Any pseudonym for meeting reservations-No use of corporate cards’

The collusion of the Gyeongin area led by Hyundai Steel and Dongkuk Steel differs from that of steelmakers in the Yeongnam area in terms of circumstances and aspects. Even for the grade, the standard purchase price was 5~20 won/kg lower. The frequency of meetings for the purchasing team leader was 35 times compared to 120 times in Yeongnam area.

Looking at the content of collusion by region, steelmakers in the Yeongnam region agreed on the extent and timing of fluctuations in the reference price through a meeting of the steel scrap purchasing team leader from 2010 to 2016 and exchange of important information on the reference price between purchasing team practitioners.

The FTC explained that the process by which the steelmaker purchasing team leaders met and reached an agreement was recorded in the workbook of the steelmaker purchasing team employee who attended the meeting.

These steelmakers continued to agree until February 2018, when the FTC on-site investigation was conducted by exchanging important information related to the standard price of purchasing team practitioners from each company’s purchasing team instead of refraining from meeting with the purchasing team leader after 2016.

Hyundai Steel and Dongkuk Steel agreed on the extent and timing of fluctuations in the reference price through a meeting of the steel scrap purchasing team leader in Gyeongin-gun and exchanging important information about the reference price between purchasing team practitioners.

There are five steelmakers in Gyeongin, including Hyundai Steel and Dongkuk Steel, among which SeAH Besteel, Cage Dongbu Steel, and Welcome Steel Industries were excluded from the action because it was not confirmed whether they participated in the case.

Meanwhile, 7 steelmakers use a pseudonym when making a meeting reservation, and proceed to the company’s supervisors privately, in order to maintain security so that the fact of collusion is not exposed to the outside, while prohibiting the use of corporate cards at all and paying for meals by collecting cash. And the prohibition of writing documents about the results of the meeting.

Kim Jung-gi, head of the Cartel Investigation Bureau, said, “This measure is meaningful in that it has detected and sanctioned collusion that has been made for a long time in secret in the iron scrap purchase market.” We will strengthen inspections on fixing subsidiary materials, and take strict measures with the principle of zero tolerance when collusion is detected.”