ED Korea's steel industry at a crossroads

Steel products are stacked at a port in Pyeongtaek, Gyeonggi Province, Wednesday, the same day the European Union announced that it is cutting its annual duty-free steel import quota by 47 percent and doubling tariffs on volumes exceeding the quota from 25 percent to 50 percent, raising concerns over impacts on Korean exports. Yonhap

The European Union announced a sweeping revision of its steel import safeguard measures: It will reduce the global duty-free import quota by half and double tariffs on imports exceeding that quota from 25 percent to a steep 50 percent.

This move, following a similar U.S. decision earlier this year, signals a rising tide of protectionism among major economies. For Korea, the world's sixth-largest steel producer and a major global exporter, this development could not come at a worse time.

The EU's decision is driven by its desire to shield domestic producers from surging imports, especially from China, whose steel glut continues to depress global prices. The European Commission has made it clear that the changes are intended to preserve market stability amid mounting global overcapacity and to strengthen Europe’s negotiating position in trade talks with the United States.

However, the consequences for Korea are severe. In 2024, Korea exported $4.48 billion worth of steel to the EU, surpassing even the $4.35 billion shipped to the United States. The EU has functioned not only as a critical market but also as a relatively stable one, thanks to the Korea-EU Free Trade Agreement. Last year, nearly 70 percent of Korea’s steel exports to Europe entered duty-free under a country-specific quota, while the remainder benefited from the global quota, also duty-free. These preferential conditions are now at risk.

The EU's revised system will drastically reduce the total volume of duty-free steel imports, resetting quotas to levels based on 2013 import data well before the current global oversupply took hold. As a result, Korea’s own quota allocation is likely to shrink significantly. If negotiations fail to preserve an adequate quota for Korean steel, exports will be subject to the newly doubled 50 percent tariff, effectively pricing Korean products out of the European market.

This blow comes as Korea’s steel industry is already reeling from a U.S. decision earlier this year to remove its quota exemptions and impose a 50 percent tariff on a broad range of imported steel products. Since then, Korean exports to the U.S. have plummeted, with declines of over 15 percent in August alone. At home, steelmakers are under pressure from falling domestic demand due to a stagnant construction sector, soaring energy costs and increasingly stringent carbon emissions regulations. The cumulative weight of these pressures is threatening the long-term viability of one of Korea’s core industries.

In light of this escalating crisis, it is unacceptable that the K-Steel Act remains stalled in the National Assembly. The bill, co-sponsored by 106 lawmakers across party lines, proposes the creation of a presidential commission on steel industry competitiveness, mandates a five-year national strategy and provides the framework for tax incentives, regulatory reform and financial support. Although both parties have agreed in principle to prioritize the legislation, political inertia continues to delay its passage. Meanwhile, the global trade landscape is shifting rapidly, leaving Korea’s steel industry dangerously exposed.

The government must act swiftly and strategically on multiple fronts. First, diplomatic efforts with the EU must intensify. The country-specific quota for Korea has not yet been finalized, and every effort must be made to secure a fair and substantial allocation. This will require not only trade expertise but also high-level political engagement.

Second, the K-Steel Act must be passed without further delay. A robust institutional framework is essential to help the industry navigate the current crisis and transition toward long-term sustainability.

Finally, Korean steelmakers must accelerate structural reforms. This includes investing in low-carbon, high-value-added steel products, expanding production within key overseas markets and enhancing competitiveness through innovation and efficiency. Government support, in the form of research and development funding, tax relief and regulatory streamlining, will also be indispensable.

Korea’s steel industry stands at a crossroads. Without bold action, cities like Pohang and Gwangyang risk becoming industrial relics of a bygone era. But with the right policies, global diplomacy and a renewed commitment to innovation, the country can preserve a pillar of its economy and emerge stronger in the new industrial order.