[Column] US and Germany Roll Up Sleeves for Domestic Steel... Where Are We Amid 'State Interventionism'?

Global Recession and Chinese Oversupply
Crisis in the Steel Industry
Absence of Mid- to Long-Term Measures Undermines Korean Economic Leadership

"The steel industry is indispensable to Germany."

This was emphasized recently by German Chancellor Olaf Scholz during a meeting with the domestic steel industry. Chancellor Scholz described it as "the sector with the highest employment in industry and strategically the most important industrial field," and announced strong support measures to protect the steel industry. He stated that electricity prices for the steel sector would be capped at 3 cents per kWh and that next year's rates would also be frozen. Considering that Germany's industrial electricity price surveyed by the OECD in 2022 was around 20 cents per kWh, this is a groundbreaking support measure. Additionally, the government decided to extend subsidies for implementing reduced working hours to stabilize employment in the steel industry for up to 24 months.

ThyssenKrupp, a leading German steel company, has recorded losses in four out of the past five years and announced plans to cut 11,000 jobs by 2030, prompting these extraordinary measures.

US Steel, once a symbol of American industrialization, is on the verge of losing competitiveness and being sold to Nippon Steel, but the U.S. government has intervened. It is expected that the U.S. will officially block Nippon Steel's acquisition of US Steel by the end of this year. In December last year, Nippon Steel agreed to purchase US Steel, a symbol of American industrialization, for $14.1 billion (approximately 20 trillion KRW), but the U.S. government cited "national security" concerns. The U.S. government believes that the merger could lead to an oversupply of Chinese steel, posing a threat to national security.

Amid global recession and China's oversupply, major countries are accelerating efforts to protect the steel industry, known as the "rice of industry." Steel is a representative upstream industry that significantly impacts not only consumer goods industries such as automotive, shipbuilding, and home appliances but also the defense industry. This is why governments refer to steel as a "geostrategic" industry.

Korean steel is also experiencing an unprecedented crisis due to the oversupply of Chinese products. POSCO and Hyundai Steel have announced shutdowns of some plants and are conducting "asset lightening" by selling overseas assets. Although the situation is still better than that of major steel companies in the U.S. and Europe, which are recording massive losses, Korean steel faces all-out offensives not only in general-purpose products but also in high value-added products such as special steel. There is no visible medium- to long-term plan to secure competitiveness in the steel industry.

Advanced countries, which once regarded subsidies and tariffs as "enemies of free trade," are now rushing to implement subsidy and tariff policies. The most powerful countries, which had set the rule to "fight with bare hands only," are now fighting with "rifles, night vision goggles, and armored vehicles." With major countries no longer respecting the free trade order and "state interventionism" prevailing, looking at the speed and methods of our government's response naturally brings a sigh. Recently, political and economic leadership has been drifting due to martial law and impeachment crises. We must quickly establish new leadership and steer the direction of our industry amid the rapidly changing global economy.