[비즈한국] The blast furnaces of the steel industry, the 'rice of the economy' that paved the foundation for South Korea's industrial growth, are rapidly cooling. Blocked by a 'triple threat'—domestic stagnation, a flood of low-priced Chinese products, and the rising wall of global protectionism—the industry has fallen below the 50-million-ton domestic consumption threshold that it had firmly maintained for 15 years.
Major companies facing a crossroads of survival, such as POSCO and Hyundai Steel004020, are betting their future on restructuring by shedding non-core assets while transforming their business models toward high-value, low-carbon production. The government and the National Assembly have also stepped in to support the reconstruction of the Korean steel industry through the 'K-Steel Act' and an advancement strategy.
A Crisis from Within and Without
The Korean steel industry is currently grappling with a triple crisis: declining domestic demand, global oversupply, and export barriers. According to KOSIS (Korean Steel Information Service), the 'steel demand'—the volume used for domestic consumption and exports—has shrunk from approximately 87 million tons in 2015 to about 76 million tons in 2024.
The Carbon Neutrality Cluster research team at Seoul National University's Institute for Future Strategy noted the necessity for restructuring in their briefing, 'K-Steel at a Crossroads: Structural Reform and Global Survival Strategy in the Carbon Neutrality Era,' stating, "The triple threat is a structural phenomenon that existed even before the carbon issue. As the industrial value-added potential declines, it is time to seek fundamental survival strategies for the industry that go beyond simply reducing carbon emissions."
For steel, the domestic market is crucial, with consumption typically twice that of exports. However, the crisis struck as domestic steel demand decreased due to factors like the construction slump. The 50-million-ton domestic consumption line, held since 2010, ultimately collapsed in 2024.
Global supply imbalance is also fatal. As the real estate downturn in China, the world's largest consumer of steel, stalled domestic demand, Chinese steelmakers have been dumping their excess volume into the global market at low prices. As domestic downstream companies prefer these cheaper Chinese steel products, the import penetration rate rose from 26% in 2021 to 31% in 2024. Furthermore, as emerging nations like those in Southeast Asia and India expand their facilities, the oversupply phenomenon has intensified.
The strengthening of protectionism is another major blow. The U.S. began imposing a 50% tariff on steel last June, and the European Union (EU) has implemented steel safeguards (TRQ, import restrictions), worsening export conditions for Korea. The Korean steel industry, which grew centered on general-purpose goods, has hit the limit of its price competitiveness. Facing the barrier of the EU's Carbon Border Adjustment Mechanism (CBAM), Korea, with its high proportion (72%) of high-emission blast furnaces, faces intense pressure for a low-carbon transition.
Government and National Assembly Take the Lead in Restructuring and Support
Recognizing the current situation as a structural crisis threatening the existence of the steel industry, the government announced the 'Steel Industry Advancement Plan' last November. The core objective is to orderly reduce general-purpose goods, which suffer from severe oversupply, and shift the industry's axis toward future growth engines: high-value and low-carbon products.
The government established 'three principles for facility adjustment.' For areas with weakened competitiveness like section steel or steel pipes, the government plans to actively support companies that propose voluntary adjustment plans, provided they maintain employment. Conversely, for hot-rolled and cold-rolled steel, where import penetration is high, the focus will first be on responding to imports before gradually adjusting. Meanwhile, for promising sectors like electrical steel or special steel, the government plans to establish R&D roadmaps and invest approximately 200 billion won to incentivize preemptive investment.
A legal foundation for policy execution has also been established. The 'K-Steel Act' (Special Act on Strengthening Competitiveness and Carbon Neutrality Transition of the Steel Industry), which passed the National Assembly plenary session on November 27 last year, acts as a 'restructuring support law' that provides exemptions under the Fair Trade Act when domestic steelmakers share information or engage in joint activities necessary for business reorganization. It also includes provisions for establishing a low-carbon steel certification system, designating low-carbon steel special zones with tax benefits, and shortening the review period for corporate mergers.
Steel Industry Shifts Toward High Value and Low Carbon
Steelmakers are drafting future response strategies focused on transitioning to high-value and low-carbon production rather than mere expansion of production volume. Beyond developing 'HyREX (Hydrogen Reduction Steelmaking)' technology that uses hydrogen instead of coal, they are focusing on high-value products such as lightweight steel plates for automobiles, materials for eco-friendly ships (high-manganese steel), and special steel for advanced industries.
Since Chairman Jang In-hwa took office, POSCO Group has been undergoing a massive rebalancing, disposing of 126 non-core and low-profit assets. By liquidating loss-making overseas entities, such as the sale of Zhangjiagang Pohang Stainless Steel (PZSS) and the disposal of Nippon Steel shares, the group aims to secure liquidity and reinvest it into future growth engines like secondary battery materials and hydrogen-reduced ironmaking. In May this year, the company plans to reduce carbon emissions by 70% through the operation of its Gwangyang electric arc furnace.
In his New Year's address, POSCO Group Chairman Jang In-hwa stated, "Based on the K-Steel Act, we will proceed with the construction of the Pohang HyREX demo plant and the Gwangyang electric arc furnace to lay the foundation for responding to the low-carbon steel market."
Hyundai Steel is also accelerating its transformation. It recently sold its forging-specialized subsidiary, Hyundai IFC, for 339.3 billion won and is considering the sale of its stainless steel facilities at the Incheon plant and its subsidiary, Hyundai Steel Pipe. As for future investment, the company plans to begin operating a 'hybrid electric arc furnace-blast furnace process' at its Dangjin Steelworks in the first quarter of this year to reduce carbon emissions.
Furthermore, POSCO and Hyundai Steel are jointly building an electric arc furnace steel mill specialized for automotive steel plates in Louisiana, USA. The total investment amounts to $5.8 billion, with Hyundai Motor Group holding an 80% stake and POSCO holding 20%. Commercial operation is targeted for 2029.
A steel industry official emphasized, "The government's advancement plan has become the first step toward overcoming this crisis. The government, companies, and associations must pool their capabilities to resolve these challenges together."