The government's soon-to-be-announced plan to strengthen the competitiveness of the steel industry is expected to guide a reduction in production of low-quality products that compete with China, while focusing on producing high-value-added products and supporting hydrogen-based direct reduced iron. The steel industry is suffering from a supply glut originating from China. The industry expects it will take some time before the government's policies produce positive effects for the steel sector.
On the 31st, multiple industry officials said, "It appears the government will not demand a reduction-centered restructuring from the steel industry like it did for petrochemicals," adding, "Instead, it seems the plan will include supporting the production of high-value-added products that are hard for China to catch up with and a long-term transition to hydrogen-based direct reduced iron."
At the start of this year, the Ministry of Trade, Industry and Energy set up a task force (TF) to strengthen the competitiveness of the steel industry and began searching for ways to revive Korea's steel sector. The plan to be unveiled early next month to strengthen the steel industry's competitiveness is based on the TF's diagnosis.
In the steel industry, for commodity products such as rebar and shaped steel, the government is expected to raise quality standards to create a structure in which only corporations with cost competitiveness survive. The rebar market, where Hyundai Steel and Dongkuk Steel Mill rank first and second, is in difficulty due to the inflow of low-priced Chinese rebar and a slump in the construction market. An industry official said, "The eight domestic companies produce about 12.3 million tons (t) of rebar, which is more than this year's demand (6.5 million t)," adding, "If quality standards are raised, smaller companies may have to shut down."
The TF is known to have proposed "product upgrading first, followed by production cuts and consolidation" as the direction for restructuring the steel industry. It judged that rebar, shaped steel, thick plate, and sheet steel, which are flooded with Chinese products, can survive only by improving quality. There is also an analysis that, as the quality gap with Chinese products continues to narrow, it will be difficult in the long term to survive competition with China's steel industry.
The government is expected to put emphasis on supporting the production of high-value-added steel such as electrical steel for automobiles and nickel steel for shipbuilding and energy, and on the transition to hydrogen-based direct reduced iron. Earlier, in Aug., the relevant ministries, including the Ministry of Economy and Finance, decided to push for upgrading the steel industry by expanding research and development (R&D) support for hydrogen-based direct reduced iron for the industry's low-carbon transition and for converting manufacturing processes using artificial intelligence, as part of the "new government's economic growth strategy." At that time, the government selected special carbon steel as one of the "15 ultra-innovation economy projects" and decided to support related technology and product development.
Expanding production of high-value-added steel and hydrogen-based direct reduced iron is also in line with the special act to strengthen the competitiveness of the steel industry and transition to green steel technology, known as the "K-Steel Act," which was introduced in the National Assembly in Aug. The K-Steel Act includes provisions for green steel technology R&D and designating green steel special zones.
However, there are concerns in the steel industry that the government's plan to strengthen the competitiveness of the steel industry will end up as an ineffective declaration, given that the United States is maintaining a 50% tariff on imported steel and the European Union (EU) has decided to raise its steel tariff from 25% to 50%.
An industry official said, "Hydrogen-based direct reduced iron has low feasibility while requiring significant investment, and if the steel plan is aligned with environmental measures, the difficulties will worsen." Another industry official also said, "Unless imports of Chinese steel are restricted and annual anti-dumping investigations are conducted like the U.S. government, it is hard to see the measures as helpful to the steel industry."