South Korea’s steel industry, long regarded as the “rice of industry” for its foundational support to key sectors such as automotive and shipbuilding, is facing an unprecedented crisis. As the world’s sixth-largest steel producer, the industry is grappling with challenges triggered by a global economic slowdown, competition from Chinese low-cost steel, potential tariffs under U.S. President-elect Donald Trump’s second term, and rising electricity prices.
Major steelmakers have been forced to restructure and cut production. Plant utilization rates, which hovered around 90% during peak periods, have steadily declined over the years, slipping to the 60-70% range in some production lines.
POSCO, the country’s largest steelmaker, announced that it would shut down the Unit 1 wire rod mill at its Pohang factory, ending a 45-year run. The company has also decided to sell its only steel plant in China, Zhangjiagang-Pohang Stainless Steel. Hyundai Steel, Korea’s second-largest steelmaker, is considering shutting down its Pohang No. 2 plant.
Experts are concerned that the steel sector, which has long been the backbone supporting domestic industries and a symbol of high-quality “Made in Korea” products, has now fallen into a slump. “Global steel demand is projected to grow at a modest rate of just over 1% annually in 2024 and 2025, following a contraction in 2023,” analysts noted.
The shutdown of POSCO’s Unit 1 wire rod mill at the Pohang factory came three months after the steelmaker halted operations of its Unit 1 steelmaking plant in July.
The steelmaking process, which removes impurities and adjusts the composition of molten steel, is a core procedure in steel production. The wire rod process involves converting billets from blast furnaces into finished products.
“We decided to shut down the wire rod mill after considering multiple factors, including the ongoing supply glut, the influx of low-cost steel products from other countries, and aging facilities,” said a POSCO representative.
A fire that broke out in POSCO’s steel mill in Pohang earlier this month forced the company to shut down the No. 3 Finex furnace, which produces molten iron and has an annual production capacity of 2 million tons. Ironically, the disruption has not affected steel supply due to the already low factory utilization rate.
POSCO is undergoing extensive restructuring, including shedding 125 loss-making and non-core assets and accepting voluntary retirements. The company is also bracing for potential labor unrest, with the union set to vote on Nov. 25. for or against a strike following failed wage negotiations. If mediation by the National Labor Relations Commission falls through, the company could face its first-ever strike since its founding in 1968.
Hyundai Steel is also dealing with challenges as it initiates long-term special maintenance programs at its plants to reduce production. Its Dangjin Steel Plant in South Chungcheong Province has been under special maintenance for three months since September, while the Incheon plant has been undergoing maintenance for six months since February.
The Pohang No. 2 plant, slated for closure, has sparked fierce resistance from the unions, affecting 400 workers from Hyundai Steel and its subsidiary Hyundai IMC. The union plans to stage a protest at the company’s headquarters in Pangyo, Gyeonggi Province, on Nov. 20.
Rising industrial electricity prices have added to the industry’s woes, particularly burdening steelmakers that have invested in eco-friendly electric furnaces to cut carbon emissions. Dongkuk Steel, which relies solely on electric arc furnaces, has reduced costs by limiting production to nighttime hours when electricity rates are lower.
Crude steel production for the first nine months of this year fell to 47.64 million tons, the lowest in 14 years since 2010, according to Korea Iron and Steel Association data. Factory utilization rates have also dropped to three-year lows, with POSCO at 85%, Hyundai Steel at 84.2%, and Dongkuk Steel’s bar and plate production at 77.4% and 63.8%, respectively.
