As it was confirmed that the reduction in the quota (cap) that domestic steelmakers can export to the European Union (EU) tariff-free is about 20%, the steel industry reacted that it "avoided the worst." They said it was at least a decent outcome because it was cut to a level lower than the EU's overall tariff-free quota reduction of 46%.
However, as the EU, Korea's No. 2 destination for steel exports, raises its tariff barriers, the exportable volume itself has shrunk, and the sense of crisis in the steel industry remains high. Each corporations is closely watching the allocation of corporation-by-corporation quotas and has begun preparing responses such as reviewing export items and assessing expected impacts by item.
According to the steel industry on the 1st, the Korea Iron & Steel Association, which has more than 40 steel manufacturers as members, began assessing the situation, including the impact on each member, immediately after the European Commission released its announcement of country-by-country steel import quota adjustments the previous day. A Korea Iron & Steel Association official said, "We are aggregating, at the association level, the share of Europe-bound exports by corporation and the item-by-item impact from the (quota cut), and we are preparing discussions on allocations to each company within the country-assigned quota."
According to the Ministry of Trade, Industry and Resources, on the 30th (local time) the European Commission announced country-by-country quotas under a new steel measure that will replace the existing steel safeguard (emergency import restriction). For 30 steel items, the EU reduced the annual tariff-free import quota by about 46%, from a total of 33.82 million tons (t) to 18.35 million t. The tariff applied to volumes exceeding the tariff-free quota will be uniformly raised from 25% to 50%. The new measure takes effect July 1.
Korea's dedicated quota decreased 19.7%, from 2,581,000 t to 2,073,000 t, a reduction of about 510,000 t. Compared with the overall reduction of 46%, Korea is seen as having fared relatively well, with the decrease less than half of that.
A steel company official said, "We see the fact that the tariff-free quota cut ratio ended up lower than initially known as the result of the government working hard in a 'government-to-government' response with the EU, with the steel industry helping well alongside," adding, "Compared with the worst-case scenario, we now have more room to export."
However, as the EU, the main export market, tightens import controls, a decline in exports by the domestic steel industry appears unavoidable. The supply chains established locally are also expected to be affected. Last year, Korea's steel exports to the EU were about 3.24 million t, accounting for 11% of total exports.
For POSCO, Europe accounted for 15% of last year's export share by region, tied for second with Japan (15%) after Southeast Asia (21%). Hyundai Steel mainly exports automotive hot-rolled and cold-rolled products and heavy plate to Europe, while Dongkuk Steel Mill primarily exports color steel sheet products.
A steel company official said, "Within the quota that can avoid tariff burdens, there is a high likelihood we will prioritize high-profitability products, volumes for existing clients, and products linked to local supply chains such as autos and batteries."
The most urgent task for the steel industry and the government is how to allocate export volumes to each company within the total quota. It is widely understood that the corporation-by-corporation ratios are likely to be adjusted based on last year's export statistics for each company.
A steel industry official said, "Under government leadership, corporation-by-corporation quotas will be discussed, and corporations are also likely to divide quotas and adjust export items through detailed discussions among themselves."
The Ministry of Trade, Industry and Resources is preparing policies to minimize the export shock and domestic market impact from the EU quota cut. Minister Kim Jung-kwan held an emergency meeting with steel industry officials on the morning of the 1st and reviewed item-by-item and corporation-by-corporation impacts. Kim said, "By strengthening inter-industry linkages and blocking unfair imports, we will create domestic demand of more than our 510,000 t quota reduction."