[The Editors' Verdict]K-Manufacturing Reduced to "China's Talent Academy"

The Rise of Chinese Industrial Talent Fostered by Korean Companies
The Reality of a Counterattack in the Steel Industry and Beyond

Inside POSCO, the local production plants established in China are referred to as the "Steel Officer Academy." POSCO began building steel production lines across China starting in the mid-1990s, even before China joined the World Trade Organization (WTO), by partnering with Chinese companies to establish stainless steel (STS) cold rolling and hot rolling plants. At that time, they entered the steel industry, which was a barren land, to secure market dominance. The talents who learned through this process eventually left POSCO and began leading the Chinese steel industry.

Although the nickname "Steel Officer Academy" can be interpreted as a source of pride for POSCO, the reality is quite the opposite. The Chinese talents nurtured by POSCO took root throughout their domestic industry and emerged as threats to their mentor, POSCO, which is why this nickname was given.

There is widespread assessment that Chinese steel products have reached a level so severe that POSCO must worry about its very survival. A company official expressed concern about the unstable sales channels, saying, "Although the shipbuilding industry is experiencing a brief boom, it is likely to decline, and steel demand is not increasing as the automobile industry shifts to electric vehicles." Small and medium-sized enterprises are using Chinese products, while large corporations are reducing demand.

According to the Korea Iron & Steel Association, imports of Chinese steel products reached 8.73 million tons last year, nearly a 30% increase from the previous year. Imports of hot-rolled steel sheets, a fundamental steel product, also approached 1.3 million tons as of November last year, an increase of over 200,000 tons. The price per ton of Chinese hot-rolled steel sheets is about 100,000 KRW cheaper than domestic products. However, the quality is no longer inferior as it was in the past.

In the "2022 Business Report" disclosed in March last year, POSCO specifically identified the threat posed by Chinese products. The report introduced that due to global steel oversupply, the operating rate has been below 80% for the past five years, stating, "If the restructuring of the Chinese steel industry is not effectively carried out, there is a high risk of product price declines and profitability deterioration." It also noted, "POSCO cannot avoid negative impacts either."

Chinese talents who passed through POSCO mastered the entire process from steel production to distribution and sales. Inside POSCO, there was an opinion at the time of entering China to install processing and distribution processes excluding steel production, but to maximize the market preemption effect, the decision was made to establish a one-stop system covering everything from production to sales. Because of this, there are recent internal voices regretting the decision to build production facilities in China 25 years ago.

Chinese products are also preferred by domestic small and medium-sized enterprises. Due to the low price of Chinese products, even POSCO's support is being ignored. A senior company official said, "Even when we offer help in developing color steel sheets, the response from companies is lukewarm."

Like other items, steel was once a cash cow industry that earned profits in China. In 1999, POSCO's galvanized steel sheet plant in Zhangjiagang, China, recorded a profit of over 1 million USD. In 2022, more than 20 years later, POSCO's sales revenue in China grew to 7.430619 trillion KRW, but it recorded an operating loss of 53.668 billion KRW. The performance has changed significantly over two decades.

The talent academy that only benefited China is not limited to POSCO. Other industries such as semiconductors are no different. The counterattack of Chinese industrial workers nurtured by Korea is becoming a reality.