Korea's Steel Exports Likely to Fall by 20%
The European Union announced on Dec. 13 that its carbon border adjustment mechanism (CBAM) would become effective on Oct. 1 next year in the six industries of steel, cement, fertilizer, aluminum, electricity and hydrogen.
Although the effective date is as mentioned above, actual additional tariff imposition is likely to start later. The grace period, which is likely to be three or four years, will be fixed this week along with whether to apply the mechanism to the petrochemical industry as well.
When it comes to South Korea, it is the steel industry that will be most affected by the mechanism. Steel exports from South Korea to the EU region totaled US$4.3 billion last year, when aluminum, fertilizer and cement exports in the same direction were US$500 million, US$4.8 million and US$1.4 million, respectively.
According to the Korea Institute for Industrial Economics and Trade, the mechanism is estimated to reduce South Korea’s aluminum exports to the region by 15 percent or so. The estimated decrease is about 20 percent in the steel industry and less than 2 percent in cement and fertilizer each. “South Korean steelmakers’ annual additional costs attributable to the CBAM are estimated at US$135 million, equivalent to an additional tariff of 2.7 percent,” it said.