South Korea on Tuesday unveiled a package to overhaul its steel industry, with government-backed plans for production cuts, an increase in the output of higher-grade specialty products and related subsidies, as global oversupply and Chinese competition put strain on one of the country’s core manufacturing sectors.
As part of the package, the government pledged 200 billion won ($139 million) in research and development funding to boost high-value specialty steel production by 2030.
The restructuring blueprint, unveiled by the Ministry of Trade, Industry and Energy, urges domestic steelmakers to “voluntarily” implement aggressive measures to streamline oversupplied segments such as rebar in return for state support, including subsidies.
The ministry plan calls for a three-track approach: Capacity reduction in commoditized products, support for domestic steelmakers’ handling of international trade disputes, and a transition toward low-carbon, high-margin steelmaking.
REBAR SEGMENT: FIRST IN LINE
The government singled out reinforced bar, known as rebar, as the first product line to undergo capacity adjustments, citing chronic oversupply and weak construction demand.
While some producers, including Hyundai Steel Co. and Dongkuk Steel Mill Co., have already trimmed production of H-beams and pipes, rebar makers have been slow to act, government sources said.
Under the plan, the government will encourage companies to reach their own consolidation agreements, offering tax, financing and regulatory incentives similar to those granted to the petrochemical sector, currently under a government-initiated revamp.
Officials, however, stopped short of announcing direct subsidies or compensation for plant closures, drawing criticism from smaller players, which are in a greater financial squeeze than large companies.
For products such as H-beams and thick plates, where firms have already submitted reduction plans, the government will provide procedural and fiscal support, conditional on employment stability and management accountability, according to ministry officials.
SPECIALTY STEELS TO LEAD NEW GROWTH
While urging consolidation in low-margin segments, the government is steering investment toward high-value specialty and electrical steels.
The ministry said it will channel 200 billion won into R&D projects for 10 types of advanced carbon steels, including high-manganese, nickel and high-silicon grades, by 2030.
The roadmap, to be finalized by the end of this year, also targets the development of ultra-strong steels for shipbuilding, energy and aerospace applications.
“The share of specialty steels in Korea’s overall output, now around 12%, will be expanded to over 20% by 2030,” according to a senior ministry official.
EXPORT SUPPORT PACKAGE TO COUNTER US, EUS TRADE BARRIERS
Alongside structural measures, the government has launched a 400 billion won export support package to help small and medium-sized steel exporters navigate tightening global trade conditions, particularly rising tariffs in the US and EU.
The Export Supply Chain Guarantee scheme, jointly financed by POSCO Holdings Inc. and state-run Industrial Bank of Korea with 20 billion won in seed capital, will provide up to 400 billion won in credit guarantees through the Korea Trade Insurance Corp.
The new scheme is designed to extend funds with favorable borrowing costs to smaller steelmakers, according to ministry officials.
At a meeting with steel executives at the Korea Chamber of Commerce and Industry earlier on Tuesday, Vice Trade Minister Moon Shin-hak urged them to “closely work with the government to ensure the success of the proposed restructuring.”
Those who attended the roundtable include POSCO President Lee Hee-geun, Hyundai Steel Chief Executive Seo Gang-hyun and Korea Iron & Steel Association Vice Chairman Lee Kyung-ho.
LUKEWARM RESPONSE
While welcoming the government’s reform measures, industry executives expressed disappointment at the lack of concrete incentives for companies that voluntarily shut or consolidate facilities.
“There’s no clarity on how firms will be compensated for the costs of scrapping or merging plants,” said an executive at a midsized rebar producer. “Without financial backing or lower power prices, it’s hard to see meaningful restructuring.”
Government officials said they are also considering tightening oversight of unfairly traded steel products, expanding origin-labelling inspections and anti-dumping investigations.
From next year, all imported steel will require a material test certificate verifying quality and source.
