[Reporter's Notebook] Why Did Hyundai Steel Halt Its Korean Plants?

U.S. Tariffs and Chinese Price Pressure
Policy Support Needed to Drive Investment

Recently, U.S. media outlets have once again highlighted Hyundai Steel's plan to invest in an integrated electric arc furnace steel mill in Louisiana. On June 25 (local time), Reuters and other outlets reported, "Hyundai Steel is pursuing multi-billion dollar investments in the U.S. manufacturing sector," describing it as "an example of long-term confidence shown in the U.S. market." The U.S. Department of Commerce emphasized Hyundai Steel's investment as a model case, citing statistics that foreign direct investment (FDI) in the first quarter fell by nearly 34% compared to the previous quarter.

However, the situation is the exact opposite in Korea. Factories are coming to a halt. Hyundai Steel has decided to completely suspend production at its Incheon rebar plant, which manufactures long steel products, from July 21 to August 31. The Dangjin plant also halted rebar production starting June 29. While the official reason is the regular summer overhaul, some interpret this as a reflection of management difficulties caused by sluggish market conditions due to oversupply and U.S. steel tariffs.

On the ground, many analyze that "the burden of electricity costs and production expenses, combined with the influx of low-priced Chinese imports, have all overlapped." Some even say, "The more products we make, the more losses we incur," because domestic steel prices are below production costs and companies are fully absorbing the increased electricity rates. Although rebar prices have dropped to the low 700,000 won range, Chinese imports are entering the market at even lower prices. For steelmakers, rather than enduring a price war, it is more rational to halt operations. Ultimately, Hyundai Steel's decision to 'shut down' can be seen as a desperate measure for survival.

The fact that a company is investing billions of dollars in the U.S. while shutting down domestic plants is closely related to the policy environment. Companies pursue efficiency. This is a natural survival strategy. The U.S. has strengthened incentives for local production through Inflation Reduction Act (IRA) subsidies and corporate tax cuts. In contrast, Korea has maintained a strong stance of "leaving it to the market" without effective countermeasures despite weak demand. Industrial strategy has not kept pace with the structural oversupply that has been warned about for years.

The Lee Jaemyung administration, which launched last month, has designated the decarbonization of the steel industry and the revitalization of regional industrial complexes as core tasks, promising a comprehensive policy framework including technical support, special zone designations, and trade response measures. However, steel industry insiders and experts continue to point out the lack of a concrete roadmap. In the industry, some say, "There is a map, but no compass." One source commented, "We cannot simply blame the private sector for domestic plants shutting down." It is time to re-examine the reality caused by the vacuum in industrial policy.