[Exclusive] "Allow Private Participation in Nuclear Power"... Steel Industry Demands 'Survival Solution' Amid Soaring Electricity Costs

Industrial Electricity Rates Soar, Undermining Cost Competitiveness
Calls for Private Sector Participation in Nuclear Power and SMRs... Requests for Legal Amendments
Operating Margins Plummet... Proposals for Restructuring Support Also Made

The steel industry has called on the next administration to expand private investment in nuclear power to enable direct electricity supply. Under the current electricity supply system led by Korea Electric Power Corporation (KEPCO), it is virtually impossible to send electricity directly to factories, so the industry is asking for amendments to relevant laws to open the way for direct electricity supply by the private sector. This is a self-rescue measure proposed by the industry, which is facing soaring electricity costs and pressure to achieve carbon neutrality, in order to secure global price competitiveness.

According to the industry on May 19, the Korea Iron & Steel Association recently delivered its 'Steel Industry Policy Tasks for the New Government' to lawmakers Eo Gigu of the Democratic Party and Lee Sanghwi of the People Power Party, who are co-chairs of the National Assembly Steel Forum. With about a month left before the presidential election, the steel industry has compiled internal opinions and established a communication channel with the National Assembly. Whether these proposals will be reflected in legislation will be reviewed by each lawmaker's office. The policy tasks include 12 major items across four areas: ▲industrial structure reform (strengthening competitiveness), ▲low-carbon transition, ▲trade response, and ▲market stabilization.

The area where the industry is raising its voice in unison is the alleviation of the 'electricity cost burden.' The association believes that about 40 trillion won in private investment will be inevitable to achieve carbon neutrality by 2050. In particular, while traditional blast furnace steelworks have secured electricity through self-generation using by-product gases, the closure of blast furnaces will increase reliance on external electricity, which is expected to significantly raise costs. The association estimates that external electricity demand, currently at 0.8GW, will surge more than 30-fold to 25GW by 2050 with the transition to electric arc furnaces.

To address this, the association has proposed opening the way for direct electricity supply. Under the current Electricity Business Act, KEPCO is virtually the only electricity provider allowed to sell electricity generated from nuclear power, but the association argues that private companies should be allowed to enter this market. Specific demands include ▲using nuclear power for clean hydrogen production and electricity supply, ▲participation in investment in small modular reactors (SMRs), and ▲amending laws to expand private electricity supply. The association is calling for clear guarantees of authority so that the industry can receive relevant electricity by encouraging private investment in nuclear power. To this end, the association is also requesting the revision or enactment of the current Nuclear Safety Act, Electricity Business Act, and the Special Act on the Promotion of Distributed Power Sources.

In recent years, the government and KEPCO have repeatedly raised industrial electricity rates for large corporations. The rates for large companies were increased by 16.6 won per kWh in October 2022, by 10.6 won in November 2023, and by a record 10.2% (16.9 won) in October last year.

An employee of Hyundai Steel Dangjin Steelworks is tapping molten iron from the No. 3 blast furnace. Asia Economy DB

In addition to soaring energy costs, global oversupply and sluggish demand have pushed the steel industry’s profitability to its limits. The average operating margin of major steelmakers?POSCO (standalone basis), Hyundai Steel, SeAH Besteel Holdings, and SeAH Steel Holdings (consolidated basis)?plunged from 13.9% in 2021 to 2.8% in 2024.

The industry has also identified the 'Electricity Industry Infrastructure Fund' as one of the causes of the industrial electricity rate burden and has proposed further reducing the current rate of 3.2%. This fund is collected by the government as a portion of electricity bills and is used for expanding power infrastructure such as utility poles and supporting vulnerable groups. The rate was lowered from 3.7% to 3.2% in July last year, and will be further reduced to 2.7% this July. However, the industry insists it should be lowered even further.

An industry official said, "Currently, price competitiveness is determined not by material costs but by energy costs," adding, "If the steel industry, which is a materials industry, collapses, the entire downstream industries such as automobiles and shipbuilding will be shaken." There is also criticism of the electricity market structure. Another official said, "Instead of addressing the structural problems of the electricity market, there is a reliance on the easy option of raising industrial electricity rates," and added, "From the perspective of the steel industry's survival strategy, directions such as expanding private sector participation need to be explored." Regarding these proposals, a Ministry of Trade, Industry and Energy official said, "These are ideas at the conceptual stage, so it is not yet time to discuss their implementation," deferring judgment on their feasibility.

The industry also mentioned the need for policy support for restructuring the steel industry. It argued that in a situation of oversupply, it is difficult for private companies to autonomously undertake restructuring due to institutional limitations such as tax and financial regulations. The industry also requested that the steel sector be designated as a national strategic industry to expand tax benefits and investment incentives. It also called for easing regulations on hiring foreign workers to alleviate labor shortages on the ground.

Proposals were also made to improve trade policies to ease the burden of raw material costs and expand exports of domestic products. The association recommended applying zero tariffs to 17 essential sub-materials for steel manufacturing. The industry expects that zero tariffs would lead to annual cost savings of over 30 billion won. In addition, regarding the European Union's safeguard measures that restrict import volumes, the industry called on the government to engage in trade negotiations with the EU to secure stable export quotas for Korean steel products.