As Korea's steel industry is actively pushing local investment to respond to steel tariffs by the U.S. Trump administration, Nippon Steel, which invested in the U.S. market first, is showing signs of faltering, drawing attention. Korean companies could follow a similar path.
Nippon Steel faces a growing burden from acquiring U.S. Steel due to weak U.S. steel demand, an aging industrial environment, and rising market uncertainty. Domestic steelmakers differ from Nippon Steel in how they invest, but some say strategies to mitigate risk will be necessary.
According to the steel industry on the 17th, Nippon Steel, when announcing second-quarter results, excluded the U.S. Steel institutional sector from its outlook for this fiscal year. Nippon Steel reports results on a fiscal year that runs from every April to the following March.
Nippon Steel explained that it excluded the U.S. Steel institutional sector from this fiscal year's outlook, citing a U.S. steel market that is worse than expected, rising expense due to aging equipment, and heightened market uncertainty.
Nippon Steel, which completed the acquisition of U.S. Steel in June for $15 billion (about 22 trillion won), is seeing its management conditions deteriorate. In the second quarter, Nippon Steel posted a cumulative net loss of 113.4 billion yen (about 1 trillion won), swinging to a loss from a year earlier.
One-off expense from the U.S. Steel acquisition and losses from selling equity in Brazil's Usiminas had a large impact. In addition, the worsening business conditions at U.S. Steel, due to factors such as the Clairton plant explosion and declining demand in the United States for certain steel items, is also cited as a cause.
Nippon Steel set a goal to modernize facilities in the United States by 2028 with an investment of $11 billion (about 16 trillion won) and generate annual profits of $2.5 billion (about 4 trillion won) going forward.
However, some in the steel industry predict it will not be easy to turn a profit because U.S. Steel mainly produces commodity steel products. Commodity products have lower added value than automotive steel sheets and special alloys.
In addition, in the United States, where wage burdens are high, the fact that Nippon Steel agreed to maintain U.S. Steel's employment and production capacity for a set period, and that President Donald Trump can exercise veto power over managerial decisions through a golden share, are cited as obstacles that make it hard to restructure the business.
Despite this situation, domestic steelmakers are accelerating their push into the United States. Since June, the Trump administration has imposed a 50% tariff on foreign steel and aluminum products, sharply reducing exports.
Hyundai Steel said in March it would spend $5.8 billion (about 8 trillion won) to build an electric arc furnace integrated steel mill in Louisiana. The plant is being built mainly to supply automotive steel sheets locally. POSCO is also considering investing in a new steel mill.
POSCO Holdings on the 30th of last month signed a strategic business agreement with Cleveland-Cliffs, which makes automotive steel sheets and other products. The goal is to strengthen the push into the U.S. market, and specific cooperation measures were not announced. The industry expects POSCO to secure local production volume by acquiring equity in the company with funds in the trillion-won range.
As both companies are entering the local market with high value-added products such as automotive steel sheets as their mainstay, they differ from Nippon Steel's investment in U.S. Steel. Automotive steel sheets exceed 1 million won per ton (t), while commodity products such as heavy plate are about 800,000 won and rebar is around 700,000 won.
A steel industry official said, "The reason the United States has been importing steel products from Korea is quality," and added, "Unlike Nippon Steel, expanding into the United States with a focus on high value-added products is positive, but measures are needed for an environment with high wages and low skill levels."