Korean steelmakers feared to fall behind EU, Japanese rivals

By Lee Kyung-min

Concerns are growing among local steelmakers over a recent tariff agreement between the U.S. and Japan, the latest in a series of unfavorable developments leaving Korea's key industry unable to benefit from surging demand for steel in the world's largest economy. The U.S. is the third-largest importer of Korean steel products after China and Japan, accounting for 9.9 percent of Korea's steel exports in 2021.

At the crux of the issue is Korea's tariff-free steel exports to the U.S. being limited to 70 percent of the three-year average between 2015 and 2017, a once-advantageous trade term over Japan and the European Union, both of which were subject to a high tariff of 25 percent despite facing no cap on export volume.

This was agreed in 2018 with trade representatives in the Trump administration under Section 232 of the Trade Expansion Act, a move the U.S. said was crucial to safeguarding its national security under heightened threat due to imported goods, but viewed largely as a measure to keep rising steel powerhouse China at bay.

Korea's steel exports to the U.S. decreased subsequently to 2.69 million tons last year, or 70 percent of the three-year average of 3.83 million tons.

The U.S. Trade Representative's office said Monday that up to 1.25 million metric tons of steel imported from Japan per year will be free from the tariff, with only additional imports being subject to the current 25 percent levy.

The measure set to take effect April 1 is similar to an earlier agreement between the U.S. and EU last October. The duty free steel exports from the EU will amount to 3.3 million metric tons.

Korean companies sidelined

“We are concerned,” said a spokesperson for Hyundai Steel, a steel affiliate of Hyundai Motor. “Our competitors in Japan and the EU will be able to make hefty exports to the U.S. without any difficulties, all the while Korean firms are left to miss out on the rare growth opportunity amid the pandemic.”

Global demand for steel increased 4.5 percent year-on-year to over 1.8 billion tons last year, lifted by expanded infrastructure investments as part of the stimulus package to weather the pandemic-induced economic crisis.

This, according to the nation's second-largest steelmaker, would have otherwise been great news, were it not for the quota, which no longer poses a sticking point for competitors in the EU and Japan.

“The U.S. announced plans of large-scale infrastructure investment, a rare boon for many steel exporters around the world. A prompt resolution is needed, since the local steel industry ended up wasting the growth opportunity due to Section 232 of the U.S. act,” the spokesman said.

Trade Minister Yeo Han-koo told a local media outlet that he would make utmost efforts to resume the stalled trade talks.

“The government will appeal the need for a swift renegotiation to the U.S., as backed by robust demand for Korea's high-quality steel products,” Yeo said.

Seoul National University economist Lee In-ho said Korea is being left out of the trade talks, in part because the country's China-friendly stance goes against the U.S.-led anti-China alliance drive.

“Korea not willing to particularly upset China could be at play in the delay of tariff talks, given the drawn-out hegemony feud between the two largest economies,” Lee said.