Steel Taking a Hit
The carbon border adjustment mechanism of the European Union is about to take effect and South Korean steelmakers’ exports to Europe, which totaled US$6 billion last year, are likely to take a hit.
In the mechanism, companies exporting steel, aluminum, fertilizers, electricity, cement, and hydrogen products to the European Union are subject to mandatory carbon emissions reporting from October this year to December 2025. The duty will be replaced with carbon taxes on Jan. 1, 2026.
South Korean steelmakers are vulnerable to the additional tariffs to be applied to carbon-intensive imports. This is because they use a lot of coal in making their products. In addition, South Korea is the fifth-largest steel exporter for the European Union behind Türkiye, Russia, India and Ukraine.
Details of the mechanism are yet to come out. “Forms, calculation methods, and so on are still unknown and it will take a lot of time to fully grasp and handle the details as those will be very complex and complicated,” one of them said, adding, “Besides, the mandatory reporting to importers is likely to result in business data and information leakage.”
The South Korean government is trying to find ways together with the companies. Those include efforts for reducing their dependence on coal by using alternative sources such as hydrogen and developing carbon reduction technologies. In addition, the government is planning to send requests to the European Union so that discrimination can be prevented and strictness can be reduced.