The influx of low-cost Chinese steel into South Korea has caused major Korean steelmakers, including POSCO and Hyundai Steel, to report significant declines in first-quarter operating profits. There are concerns that if the United States imposes higher tariffs on Chinese steel, more Chinese steel may flood the Korean market.
According to industry data on Jun. 3, POSCO Holdings’ operating profit for the first quarter fell 17.3% year-on-year to 583 billion won ($423 million), while Hyundai Steel’s operating profit plummeted by 83.3% to 55.8 billion won ($40.6 million). SeAH Steel’s operating profit dropped by 67.7% to 64.8 billion won ($47 million), and Dongkuk Steel’s profit declined by 33.1% to 52.5 billion won ($38 million).
The industry attributes the decline in first-quarter profits to a slowdown in Korea’s construction industry and increased steel imports from China. The Korean Iron & Steel Association (KISA) reported that Korea imported 4.05 million tons of steel in the first quarter of this year, with approximately 65% coming from China. This is an increase of about ten percentage points compared to last year’s period. Out of the 90 million tons of steel exported globally by Chinese steelmakers the previous year, 8.73 million tons were imported into Korea, marking a 29.3% increase from the previous year (6.75 million tons).
Chinese steel is priced over 10% lower than Korean steel. Notably, steel plates with 6 millimeters or more in thickness from China are about 20% cheaper than their Korean counterparts, priced at 700,000 to 800,000 won per ton. These steel plates are primarily used in ship manufacturing. Last year, Korea imported 1.21 million tons of steel plates from China, a 4.4-fold increase from the previous year.
If the U.S. raises tariffs on Chinese steel, it could result in increased volumes being diverted to Korea. An industry insider said, “It is likely that China will push more steel to Korea, which lacks special trade protection.”
U.S. President Joe Biden has directed the U.S. Trade Representative (USTR) to triple the tariffs on Chinese steel, raising them from an average of 7.5% to 22.5% under Section 301 (Super 301) of the U.S. Trade Act. Additionally, Biden has instructed the USTR to take a hard line against steel dumping (the practice of selling large quantities of products at low prices) by China in neighboring countries, such as Mexico and Chile.
The Korean industry is considering filing an anti-dumping case against Chinese steel. Anti-dumping cases are pursued when a foreign product is sold in the Korean market at a significantly lower price than the domestic market, harming the local industry. If the complaint is upheld, anti-dumping duties can be imposed to bridge the gap between normal and dumped prices, thereby protecting domestic industries from unfair trade practices.
