As the domestic steel industry faces a prolonged downturn due to the onslaught of low-cost Chinese steel, Pohang City has sent a request to the Korea Housing Builders Association asking for the priority use of domestically produced steel products. The Korea Housing Builders Association is an organization that includes major domestic construction companies as its members.
According to Pohang City and the construction industry on the 31st, Mayor Lee Gang-deok of Pohang City sent an official letter to the Korea Housing Builders Association earlier this month titled 'Request for cooperation in using domestic steel to overcome the steel industry crisis.' In the letter, the mayor particularly requested, "We kindly ask that domestically produced steel products be prioritized in purchasing various construction materials and goods used at construction sites."
The mayor explained, "POSCO decided to close its No. 1 steel mill, which had been operating for 50 years, citing declining revenue and aging facilities, followed by the closure of its No. 1 wire rod mill, which had been operating for 45 years. Hyundai Steel also decided to halt operations at its Pohang No. 2 plant, citing management efficiency, which has further heightened instability in the local steel industry."
"With the successive factory closures, the local steel industry faces concerns of large-scale layoffs, employment instability, accelerated population decline, and diminished consumer spending, leading to severe impacts beyond the stagnation of the local commercial sector on the overall regional economy," he noted, urging relevant authorities to provide substantial support to protect the struggling steel industry.
The fact that local government leaders have directly appealed to construction companies to use domestic steel indicates the severity of the crisis in the domestic steel industry. The domestic steel industry has seen a significant decline in revenue due to the prevalence of low-priced Chinese products in the market. The cumulative operating profit of the three major steel companies (POSCO, Hyundai Steel, Dongkuk Steel Mill) for the third quarter of this year was approximately 2.3978 trillion won, which represents a 45.3% decrease compared to the previous year.
Chinese steel companies, which have cost advantages in labor and other production expenses, are expanding production despite weak domestic demand and exporting the excess. According to the Korean Steel Association, China's total steel production from January to October this year was 850 million tons, exceeding the combined production of the second-place India (123 million tons), Japan (70 million tons), the United States (66 million tons), Russia (59 million tons), and South Korea (53 million tons).
Recently, the sharply rising exchange rate has also become a concern for the industry. Domestic companies import iron ore and coking coal, essential for steel production, from countries like Australia and Brazil; thus, higher exchange rates increase raw material expenses. A representative from the steel industry said, "Despite the onslaught of Chinese products, we have refrained from raising prices for some time. However, with recent increases in raw material costs, corporate management is at a critical juncture."