Imports of Chinese heavy plate (thick steel plate 6 mm or more) increased even after anti-dumping tariffs were imposed. Although the government erected a tariff wall in response to the low-price offensive of Chinese steel, critics say bonded zones, where export-use materials and supplies can be brought in without tariffs, may remain a blind spot in oversight. Inside and outside the steel industry, voices are calling for a thorough check of the actual end use of inflows into bonded zones to prevent them from being abused as a route to evade tariffs.
◇Chinese heavy plate imports rise despite tariffs
According to the Korea Iron & Steel Association on the 1st, domestic sales of Korean-made heavy plate totaled 2,129,000 tons in January–April this year, up 8.4% from the same period a year earlier. The increase is attributed to stable demand for shipbuilding and additional demand from large construction projects such as semiconductor plants.
However, imports of Chinese heavy plate reached 306,000 tons over the same period, up 15.0%. The growth rate of Chinese imports was nearly double the growth rate of domestic sales. The government, judging that a volume offensive of inexpensive Chinese heavy plate is disrupting the domestic market, has applied anti-dumping tariffs of 27.91% to 34.10% since Nov. last year. Even so, Chinese heavy plate imports this year increased by as much as 72.5% year over year each month except January.
The industry views the increase in Chinese heavy plate imports after tariff imposition as influenced by a tariff-exemption structure using bonded zones. Steel brought into bonded zones for manufacturing export products may be exempt from tariffs. For example, if a shipyard dock (shipbuilding yard) operates as a bonded zone, bringing in Chinese heavy plate to build a vessel and delivering it overseas is not counted as distribution in the domestic market. Even if the heavy plate targeted by tariffs is used as export-use materials and supplies in a bonded zone, it is not taxed as a domestic import.
The steel industry believes this structure can undermine the effectiveness of anti-dumping tariffs. An industry official said, "If you use bonded zones, you can keep bringing in Chinese steel, so unless you properly verify whether the inflows were actually used for export, it is easy for holes to appear in the tariff wall—a concern that is repeatedly raised internally."
◇Importers expand bonded plants as hot-rolled tariffs take effect
In hot-rolled steel plate, where final anti-dumping tariffs were recently implemented, the use of bonded zones is also emerging as a new variable. Hot-rolled is the materials and supplies for downstream steel products such as cold-rolled and steel pipe. It is used across manufacturing, including autos, shipbuilding, construction, and machinery. As an item with a domestic market of about 10 trillion won, the ripple effect of low-priced imports is significant. The government, finding that hot-rolled products from China and Japan are harming the domestic industry, has applied anti-dumping tariffs of up to 33.10% and 33.43%, respectively, since Apr. 23.
In fact, some hot-rolled importers have recently been increasing bonded plants. A bonded plant is a type of bonded zone where foreign goods can be brought in as materials and supplies for manufacturing and processing. If imported hot-rolled is brought into a bonded plant, processed, and then exported, anti-dumping tariffs are not incurred. For items like hot-rolled, where processing and shipment routes are complex, whether this volume was actually used for export can become a point of contention.
Separate from reconciling inbound and outbound volumes of hot-rolled on paper, when multiple companies' hot-rolled volumes are processed and shipped in the same space, observers say it is hard on the ground to determine whether imported materials and supplies were actually投入 into export products and whether they did not mix with domestic distribution volumes. An industry official said, "If multiple companies' hot-rolled products are mixed inside a bonded plant, it is virtually impossible to verify whether the imports were used for export or distributed domestically."
Even if steel prices recover, if Chinese inflows do not decrease, improvements in domestic steelmakers' earnings could be limited. At the end of this month, the domestic distribution price of heavy plate rose to 1 million won per ton and hot-rolled to 960,000 won per ton, up 9.9% and 20%, respectively, from the start of the year. With tariff imposition and rising raw material prices intersecting, steel prices are recovering, but the more Chinese steel comes in through bonded zones, the more limited the tariff effect is likely to be and the more domestic volumes could lose ground.
A steel industry official said, "It is positive that some steel demand and prices are picking up, but if inflows of Chinese steel through bonded zones increase, the improvement in earnings will inevitably be limited," adding, "Since the government imposed tariffs to reduce damage from low-priced imports, it should also check the actual end use of volumes brought into bonded zones and whether they were taken out into the domestic market to shrink tariff blind spots."