'Korean Ship Made with Japanese Steel Rails'... Korean Steel Industry Furious

[Image source=Yonhap News]

[Asia Economy Reporter Park So-yeon] As the Tokyo Olympic special demand has collapsed, major Japanese steelmakers are dumping their products to domestic shipbuilders, exacerbating the damage and dissatisfaction among domestic steel companies. While the steel industry is pushing for price increases in the third quarter of this year, the import of Japanese steel at drastically low prices is intensifying conflicts between upstream and downstream industries.

According to the steel industry on the 13th, the price of Japanese structural steel imported into Korea in the third quarter of this year is set at around 650,000 to 700,000 KRW per ton, about 50,000 to 60,000 KRW lower than Korean products. As a result, the purchase of Japanese structural steel by large domestic shipbuilders has sharply increased, with Company A's purchase ratio of Japanese structural steel exceeding 90% this year.

Consequently, there have even been cases of steelmakers giving up orders. A domestic steel company A recently gave up third-quarter orders after shipbuilders requested prices matching Japanese products. A representative from steel company B said, "The shipbuilders proposed prices in the mid-600,000 KRW range, and despite several negotiations, we gave up orders because the price was below manufacturing costs," adding, "The collapse of the Tokyo Olympics has left surplus steel products, which our shipbuilders are importing in large quantities, excessively increasing the share of Japanese products, thereby worsening the difficulties of domestic steelmakers."

Due to the rise in raw material prices such as iron ore, steelmakers are pushing for product price increases in the third quarter of this year. Hyundai Steel raised the prices of distribution-oriented thick plates and rebar offered to the distribution market by about 10,000 to 20,000 KRW per ton starting this month. POSCO is also planning to raise steel prices in the third quarter and decided to adjust hot-rolled prices upward by customer segment. In this situation, as large shipbuilders increase the proportion of low-priced Japanese products instead of negotiating prices, conflicts between upstream and downstream industries are intensifying.

Company C also expressed disappointment, citing past cases when the steel industry actively supported the shipbuilding industry during times when its survival was threatened. A representative from Company B said, "While I understand that it was an unavoidable choice for the company's survival, it is quite disappointing that although we provided thick plates below cost during difficult times, the domestic steel industry turns a blind eye when it is in trouble."

As dissatisfaction among domestic steelmakers over the dumping of Japanese products rises, the possibility of a joint response centered on the Korea Iron & Steel Association is also being raised.

Meanwhile, the steel industry is facing a triple hardship of sharply declining domestic and overseas demand due to the COVID-19 pandemic, rising raw material prices, and dumping of imported products. According to the recent one-month market consensus from the securities industry, POSCO's consolidated operating profit for the second quarter is expected to be 155.6 billion KRW, a sharp drop of 85.4% from 1.0686 trillion KRW in the same period last year. Some in the securities industry even suggest that POSCO may record a quarterly loss for the first time in 20 years. Hyundai Steel is also predicted to continue its three consecutive quarters of losses. Following losses in the fourth quarter of last year and the first quarter of this year, it is expected to record a loss of 19.8 billion KRW in the second quarter as well.