The government is considering imposing a provisional dumping tariff of up to 38% on thick steel plates (thicker than 6mm) imported from China, but there are reactions from the steel industry that its impact on the market will be limited. One of the main consumers of these plates, the shipbuilding industry, is less affected by tariffs due to the bonded factory system.
According to industry sources on the 25th, the steel industry and the shipbuilding industry are currently negotiating prices for thick plates. The two industries negotiate prices for thick plates twice a year, and this negotiation has been ongoing since last September. The price of thick plates has slightly decreased from the mid-900,000 won range in the second half of 2023 to the low-900,000 won range in the first half of last year. The steel industry argues that prices should rise as the thick plate sector is below its breakeven point. On the other hand, the shipbuilding industry has no incentive to raise the price of domestically produced thick plates, as it can use Chinese thick plates without tariffs in the bonded area. The price of thick plates accounts for about 20% of the cost of shipbuilding.
The steel industry has seen its performance deteriorate significantly due to the influx of cheap steel products from China. Last year, POSCO Holdings reported an operating profit of 1.637 trillion won in its steel sector, a 36% decrease compared to the previous year, while Hyundai Steel's operating profit dropped by 80% to 159.5 billion won. Dongkuk Steel Mill's operating profit also decreased by 57% to 102.5 billion won during the same period.
The distribution price of Chinese thick plates is around 750,000 won per ton, making it more expensive than domestically produced products (900,000 won per ton) if the maximum tariff is imposed. Thick plates make up about 15% of the products from steel companies, so an increase in their prices would also improve the profits of these companies. However, the main consumers of thick plates, the shipbuilding industry, find the impact minimal as they utilize the bonded area without tariffs. The utilization rate of the bonded factories in the shipbuilding industry is about 92%.
As a result, Pohang, Gwangyang, and Dangjin, where the steel industry is a major sector, are demanding government support measures. The three cities previously issued a joint request stating, "Steel corporations in the cities are in urgent need of policy considerations such as financial support and tax incentives. Please prepare long-term support measures for industry restructuring and enhancing competitiveness through the development of super gap technology." They have also requested the government to designate the three cities as "special areas for responding to industrial crises."
Pohang has also proposed a domestic steel usage allocation system to the construction industry, which is one of the major consumers of steel products. A Pohang official noted, "There is no way to mandate the use of domestic steel products, so we suggested this as a means of encouraging their use to key consumers through construction-related associations," and added, "We are also pursuing support measures through the enactment of a special law to strengthen competitiveness in the steel industry."
A Pohang official stated, "The number of people employed in Pohang's steel industry reaches 28,000. There is a sense of crisis as the local economy is significantly weakening due to the steel industry's plants shutting down and closing." Last year, POSCO's No. 1 steelworks was closed, and operations at the wire rod mill were halted. Hyundai Steel is also operating its Pohang No. 2 plant at reduced capacity, while the Dangjin steel mill made the unprecedented decision to close its workplace since the company's inception.