Countervailing Subsidies
The United States and the European Union are raising trade barriers in the steel industry.
The European Parliament passed the Carbon Border Adjustment Mechanism bill on April 18 to disadvantage imports containing more carbon. EU carbon border taxes will be introduced in stages from 2026 to 2034 after mandatory carbon emissions reporting from October this year to 2025.
The U.S. Department of Commerce is likely to impose a countervailing duty of 1.1 percent on Hyundai Steel’s thick plates. According to the department, the price of electricity for industrial use has been low in South Korea and this low price has acted as a subsidy. The final decision will come out within six months and the same countervailing duty is likely to be imposed on multiple South Korean steelmakers down the road.
With external uncertainties increasing as above, domestic electricity price hikes are becoming another issue. KEPCO raised the price of electricity for industrial use by 13.1 won per kWh in the first quarter of this year and the price is likely to be raised over and over with the corporation’s operating loss exceeding 32 trillion won (US$24 billion).
This means an increasing cost burden on steelmakers. For instance, Hyundai Steel’s additional payment is likely to amount to tens of billions of won this year. It is running 10 electric furnaces in South Korea as the largest electric furnace steelmaker in it. The furnaces produce 11 million tons of molten metal a year by consuming 600 billion won (US$449 million) of electricity.