The amount of rebar that can be produced at all domestic steel mills is about 12 million tons (t). But right now we're making only 7.5 million tons. As the construction sector tilts downward, demand for rebar has fallen sharply, so the more we make, the more we lose. (An official at a major steel company)
The "steel powerhouse," which has had the world's highest per capita crude steel output for 13 straight years, is wobbling. That's because construction, which accounts for 40% of domestic steel demand, is in a slump. Construction has driven steel demand by generating large-scale demand for rebar and H-beams.
According to the World Steel Association (WSA) and the Korea Iron & Steel Association on the 16th, Korea's per capita steel production last year (estimate) was about 1,213 kg. It has ranked No. 1 in the world for 13 years since 2012.
Taiwan is No. 2 with about 870 kg, and China is No. 3 with about 681 kg. Korea's per capita steel production is the overwhelming leader among major countries. Even compared with Japan (about 656 kg) and Germany (about 421 kg), both considered manufacturing powerhouses, it is two to three times higher.
Korea's steel production surged alongside the three pillar industries of construction, automobiles, and shipbuilding. Construction accounts for 40% of domestic steel demand. During the first new town developments such as Bundang and Ilsan from 1989 to 1996, rebar demand reached 4.08 million tons (t). Domestic rebar demand rose from 2.99 million tons in 1988 to 10.06 million tons in 1996.
In the 2000s, construction boomed with the second new town projects and expanded apartment supply, sending steel consumption soaring. In 2003, domestic rebar demand hit an all-time high of about 12.26 million tons.
Around the same time, domestic auto production jumped, led by Hyundai Motor and Kia. Cold-rolled steel sheets, ultra-high-strength steel sheets, bodies, and parts were mainly used in auto manufacturing. Domestic auto production surpassed 3 million units in 1995 and reached 5.2 million in 2007. About 1 ton of steel goes into a single car. Automobiles currently account for 25% to 30% of domestic steel demand.
Shipbuilding accounts for 15% to 18%. Heavy plate is mainly used in ship construction and offshore plants. In the early 2000s, Korea's shipbuilding industry ranked No. 1 globally in order backlog and output, and heavy plate (thick steel plate) consumption surged. However, unlike construction, where all demand is domestic, automobiles and shipbuilding are largely exported directly or indirectly. It is fair to say that more than 90% of steel used in shipbuilding and 60% to 70% of steel used in automobiles is exported and consumed overseas.
As construction, the "big spender" in steel, goes through a downturn, the steel industry is feeling a direct impact. This is evident in domestic demand for rebar, which is heavily used in construction. In 2011, when the construction market slumped, rebar demand plunged to the 8-million-ton range. It then topped 10 million tons again in 2017 during the real estate boom, but fell to 7.8 million tons in 2024 amid high interest rates and tight construction project financing (PF). As the construction sector entered a prolonged slump last year, rebar demand is estimated to have fallen below 7 million tons.
Rebar demand is likely to shrink further this year. That can be seen in housing starts area, one of the construction indicators directly linked to rebar demand. Starts area marks the point when steel (such as rebar and H-beams) actually begins to be used on-site. According to the Ministry of Land, Infrastructure and Transport, last year's outlook for starts area was below 65 million square meters, down 16% from a year earlier. Starts area plunged 31.7% to 75.7 million square meters in 2023, then, due to base effects, rose 2% to 3% to 78 million square meters in 2024.
The construction market is expected to bottom out in the second half of this year and gradually recover. This year's social overhead capital (SOC) budget is 21.1 trillion won, up 8.2% (1.6 trillion won) from last year. Still, it is uncertain whether Korea can maintain its status as a "steel powerhouse." India and Southeast Asia's ASEAN countries are expanding construction and infrastructure, sharply increasing steel production. India's steel output reached 164.9 million tons last year, up more than 10% from a year earlier. However, because of its large population (about 1.42 billion), per capita steel output is about 116 kg, ranking sixth.
Park Seong-bong, an analyst at Hana Securities, said, "Although domestic steel demand is expected to decline due to the weakness in construction, this year will likely mark the bottom," adding, "Infrastructure expansion led by the government is expected to have a positive impact on steel demand."