In 2025, Korea's industrial sectors diverged in fortunes. Automobiles and petrochemicals struggled due to high U.S. tariffs and the fallout from the Russia-Ukraine war, while shipbuilding and defense enjoyed a boom as global demand increased. We examine key issues that will drive the global economy in 2026 and forecast their sector-by-sector impact. [Editor's note]
In Pohang, North Gyeongsang Province, Korea's representative steel city, there are a total of 265 steel companies. They operate 355 plants. Of these, 317 are in operation. The remaining 38 cannot run their machines. That is because revenue does not exceed operating expense. The result is a confluence of surging electricity bills, rock-bottom steel product prices, and a slump in demand.
Major steelmakers are no exception. Hyundai Steel halted operations at the Pohang No. 2 plant early this year. The plant, which Hyundai Steel began operating after Kangwon Industry was acquired by Hyundai Motor Group in 2000, stopped after 25 years. It was a core plant for Hyundai Steel whose export volume exceeded $50 million even 7 to 8 years ago. A Hyundai Steel official said, "We only notified the suspension of operations, and whether to restart remains undecided."
The steel industry is unlikely to escape sluggishness in 2026. The "triple whammy" facing Korea's steel industry—structural stagnation, tariff burdens, and weak real estate and construction demand—is expected to persist. Min Dong-jun, honorary distinguished professor of materials science and engineering at Yonsei University, said, "At the core of the steel market's current situation is a mismatch between our companies' production capacity and demand," adding, "Both the domestic and export markets are in the same shape, posing structural difficulties."
The global steel industry has entered a structural slump for the first time in about 10 years. In 2016, major manufacturing industries, including steel, also fell into a slump due to overseas market weakness and oversupply. But not all of the global steel industry is facing a crisis at the same level. According to the World Steel Association (WSA), global crude steel production in 2024 was 1.8826 billion metric tons, down 0.8% from a year earlier. Korea's annual crude steel production was 63.5 million tons, down 4.7%. This can be interpreted to mean the downturn is deeper than in the global steel industry.
From January to November 2025, Korea's cumulative crude steel production was 56.1 million tons, down 3.7% from the same period a year earlier. If this decline continues, Korea's annual crude steel production last year is expected to come to around 61 million tons. That is the lowest in 15 years since 2010 (58.915 million tons). Crude steel refers to the first solid steel product made by pouring molten iron.
Korea's steel industry began to falter about four years ago. Since 2022, the influx of low-priced Chinese steel has shaken the status of a global steel power. China has exported steel products at low prices as domestic demand slowed and the products could not be absorbed at home.
According to the Ministry of Trade, Industry and Energy, Korea's steel export value traced a downward curve starting in the second half of 2022 and recorded negative growth of 21.2% year-over-year in September of that year. After continuing in negative territory, it moved sideways briefly, and from May to November last year it has been in its seventh consecutive month of contraction.
This year, China's weak domestic steel demand is expected to continue. The World Steel Association projected that China's steel demand this year will decrease by 1% from the previous year. In March last year, the Chinese government formalized steel production cuts. At the Central Economic Work Conference held on the 10th to 11th of last month, it mentioned "oversupply," pointing to expected production cuts and restructuring ahead. However, many expect any improvement in conditions to be gradual.
Baek Jae-seung, an analyst at Samsung Securities, said, "Profitability in China's steel industry has deteriorated to the 2015 level, just before restructuring was carried out 10 years ago," adding, "How strongly the Chinese government pushes ahead with restructuring will be the key for the steel industry this year."
"Tariff bombs" from key export destinations such as the United States and Europe are also hurdles Korea's steel industry must overcome. Due to the U.S. 50% high tariff, steel exports to the United States are falling sharply. According to the Ministry of Trade, Industry and Resources and the Korea Customs Service, cumulative steel export value as of November last year was $27.8 billion, down 8.8% year-over-year. Thanks to a semiconductor boom, total annual cumulative exports surpassed $700 billion, but steel was an exception. As of September, steel exports to the United States fell by about 16% from a year earlier. By the end of last year, the tariff burden borne by the steel industry was estimated at around 400 billion won.
Since the 26th of last month, Canada has reduced the application standard for steel tariff rate quotas (TRQ) for countries with free trade agreements (FTA), including Korea, from 100% to 75%, and plans to impose a 25% tariff on steel derivative products.
The European Union (EU) also reduced its annual duty-free import quotas on imported steel products. More recently, Vietnam, one of Korea's key steel export destinations, moved to impose anti-dumping tariffs against many countries around the world. It cited a sharp increase in imports of foreign steel in its market that is causing serious damage to Vietnam's steel industry.
The Korea Institute for Industrial Economics & Trade (KIET) projected overall weakness in the steel industry this year, with the export segment expected to be particularly sluggish. In its report, "2026 economic and industrial outlook," KIET noted, "The IT and bio industries will lead growth in total exports across the 13 major industries," while adding, "Exports in the materials industry group are expected to decline slightly." It forecast steel industry export value to fall 5.0% from last year.
A bleak outlook for real estate and construction, once the core of domestic demand, is another major factor in the steel industry's slump. Consumption of construction steel was about 47.8 million tons in 2024 and has been falling over the past decade. With the construction sector entering a phase of reduced supply centered on housing through 2029, a recovery in demand for construction steel such as rebar and sections remains distant. Building permits last year fell 18.1% from the 10-year average, and construction starts fell 16%, keeping volumes weak.
According to the Construction & Economy Research Institute of Korea, construction investment this year is expected to record a 9.0% contraction, the lowest since 1998 (-13.2%) right after the foreign exchange crisis. While domestic and international policy institutions see Korea's construction investment rebounding to around the 2% range this year, many analysts say the base effect must be taken into account.
Cho Young-mu, head of NH Financial Research Institute, said, "In the private construction sphere, the difficulty of discerning good from bad in real estate project financing (PF) is still a drag," adding, "Infrastructure investment such as social overhead capital (SOC) may increase slightly this year, but it will be hard for the construction economy itself to show a clear recovery."
Regarding the bipartisan "K-steel act (special act to strengthen steel industry competitiveness and transition to carbon neutrality)," many in the industry say it is insufficient. The government has also expressed its intent to restructure the steel industry going forward, but the view is that this alone will not be enough to spur a recovery.
Industry players are calling for direct subsidies for converting to hydrogen direct reduced iron, an eco-friendly steelmaking process, and for cuts in electricity rates. As the steel industry advances with large companies focusing on reducing generic rebar and electric furnace capacity while fostering high value-added, low-carbon sheet and specialty steel, they also note that support is needed for mid-sized companies.
Professor Min Dong-jun said, "The enforcement decree of the K-steel act is scheduled to be drawn up in January to February, but the problem is that it is focused on the mid- to long-term," adding, "I hope the enforcement decree will show a strong will from the government so the steel industry can hold out until market demand recovers."