Korea steel industry faces triple shock from structural slump, tariffs, and weak construction

SEATTLE (Scrap Monster): In 2025, Korea's industrial sectors diverged in fortunes. Automobiles and petrochemicals struggled due to high U.S. tariffs and the fallout from the Russia-Ukraine war, while shipbuilding and defense enjoyed a boom as global demand increased. We examine key issues that will drive the global economy in 2026 and forecast their sector-by-sector impact.

In Pohang, North Gyeongsang Province, Korea's representative steel city, there are a total of 265 steel companies. They operate 355 plants. Of these, 317 are in operation. The remaining 38 cannot run their machines. That is because revenue does not exceed operating expense. The result is a confluence of surging electricity bills, rock-bottom steel product prices, and a slump in demand.

Major steelmakers are no exception. Hyundai Steel halted operations at the Pohang No. 2 plant early this year. The plant, which Hyundai Steel began operating after Kangwon Industry was acquired by Hyundai Motor Group in 2000, stopped after 25 years. It was a core plant for Hyundai Steel whose export volume exceeded $50 million even 7 to 8 years ago. A Hyundai Steel official said, "We only notified the suspension of operations, and whether to restart remains undecided."

The steel industry is unlikely to escape sluggishness in 2026. The "triple whammy" facing Korea's steel industry—structural stagnation, tariff burdens, and weak real estate and construction demand—is expected to persist. Min Dong-jun, honorary distinguished professor of materials science and engineering at Yonsei University, said, "At the core of the steel market's current situation is a mismatch between our companies' production capacity and demand," adding, "Both the domestic and export markets are in the same shape, posing structural difficulties."

The global steel industry has entered a structural slump for the first time in about 10 years. In 2016, major manufacturing industries, including steel, also fell into a slump due to overseas market weakness and oversupply. But not all of the global steel industry is facing a crisis at the same level. According to the World Steel Association (WSA), global crude steel production in 2024 was 1.8826 billion metric tons, down 0.8% from a year earlier. Korea's annual crude steel production was 63.5 million tons, down 4.7%. This can be interpreted to mean the downturn is deeper than in the global steel industry.

From January to November 2025, Korea's cumulative crude steel production was 56.1 million tons, down 3.7% from the same period a year earlier. If this decline continues, Korea's annual crude steel production last year is expected to come to around 61 million tons. That is the lowest in 15 years since 2010 (58.915 million tons). Crude steel refers to the first solid steel product made by pouring molten iron.

Korea's steel industry began to falter about four years ago. Since 2022, the influx of low-priced Chinese steel has shaken the status of a global steel power. China has exported steel products at low prices as domestic demand slowed and the products could not be absorbed at home.

According to the Ministry of Trade, Industry and Energy, Korea's steel export value traced a downward curve starting in the second half of 2022 and recorded negative growth of 21.2% year-over-year in September of that year. After continuing in negative territory, it moved sideways briefly, and from May to November last year it has been in its seventh consecutive month of contraction.

Courtesy: www.biz.chosun.com