[Ferro-Alloys.com] South Korea Unveils 770 Billion Won Steel Restructuring Plan

Government targets high-value steel production amid criticism over excluded electricity cost cuts and voluntary industry adjustments

The South Korean government has announced a restructuring plan for the steel industry, which is grappling with a "triple crisis" of low-cost competition from China, domestic demand stagnation, and high U.S. tariffs. The plan aims to reduce production of general-purpose products like rebar and shaped steel while shifting the industry’s focus toward high-value-added products such as automotive and defense-grade specialty steel. Financial support totaling 570 billion Korean won will also be provided for export-focused companies.

The Ministry of Trade, Industry and Resources unveiled the "Steel Industry Advancement Plan" at the Economic Ministers’ Meeting and the Industrial Competitiveness Strengthening Ministers’ Meeting on the 4th. However, critics argue the plan lacks effectiveness, as it excludes the industry’s urgent demand for reduced industrial electricity rates and leaves structural adjustments to the sector’s discretion, similar to the petrochemical industry.

◇Rebar Production Cuts… Restructuring Toward High-Value Products

Global steel market oversupply expanded from 470 million tons in 2021 to 590 million tons last year. Meanwhile, domestic demand shrank from 56 million tons in 2021 to 47.8 million tons last year, breaking the "50 million-ton threshold" due to a construction slump.

The government will first encourage voluntary restructuring in the rebar and shaped steel sectors, where oversupply is severe. For rebar—with a low 3% import ratio—it will simplify or exempt regulations and procedures related to business restructuring and offer tax incentives to drive voluntary capacity reductions. If necessary, the government will consider enacting a "Special Steel Act." For hot-rolled, cold-rolled, and zinc-coated steel sheets, which have higher import ratios, measures to curb low-cost imports will be prioritized before assessing phased adjustments. A ministry official explained, "These measures were tailored to each product’s specific circumstances."

Major steelmakers like Hyundai Steel and Dongkuk Steel, which have high rebar sales ratios, will face unavoidable portfolio adjustments. Dongkuk Steel recently halted operations at its Incheon plant—the country’s largest rebar production facility—for a month, while Hyundai Steel has indefinitely suspended its Pohang No. 2 plant. However, these efforts remain insufficient to stabilize market supply.

To counter rising trade pressures—including the U.S.’s 50% tariff and the EU’s shift to safeguard (import quota) measures—the government prepared a 570 billion Korean won financial support package. Of this, 400 billion won will fund export guarantees, 150 billion won will reduce interest burdens, and 20 billion won will provide emergency loans to tariff-affected companies.

To transition away from general-purpose products, 200 billion won will be invested in research and development (R&D) by 2030. This aims to raise the global market share of 10 specialty steel items—including high-manganese steel for LNG vessels, automotive lightweight steel sheets, and defense/aerospace specialty steel—from 12% to 20%.

◇Industrial Electricity Rate Cuts Excluded

However, the government’s restructuring plan has drawn criticism for omitting the industry’s demand for reduced industrial electricity rates. "Without lower electricity costs, fundamentally improving profitability remains difficult," said an industry source. Additionally, concerns arise that restructuring in the rebar sector—where technological barriers are low and many small- and medium-sized steelmakers operate—could disproportionately harm smaller suppliers rather than large companies.

The government’s reliance on voluntary industry-led restructuring is also seen as a limitation. The petrochemical industry’s self-driven restructuring, announced in August, has shown little progress. Vice Minister of Economy and Finance Koo Yun-cheol, while reviewing the petrochemical sector’s restructuring progress, noted, "Delays in some industrial complexes and companies’ business reorganizations have fueled market skepticism about the industry’s sincerity. With deadlines approaching, all complexes and companies must accelerate efforts."

• [Editor:tianyawei]