Waiting for Another Takeoff

Korea’s steel industry supplied steel products for 40 million units of mid-size vehicles and 3,000 vessels to the country’s automobile and shipbuilding sectors during the last 10 years, thus fulfilling its role as a key industry. It is undoubtedly true that the steel industry has made a huge contribution to Korea becoming No. 2 in the world in terms of shipbuilding tonnage and 5th in automobile production. 

Korea joined the ranks of steel-making countries in 1970, when the Steel Industry Promotion Act was established in order to complete the first blast furnace of what is now POSCO. Its crude steel production volume soon surpassed one million tons and skyrocketed to 68.519 million tons in 2011, turning the country into the world’s sixth largest steel-manufacturing nation. Per-capita crude steel consumption amounted to 1,161kg in 2011, the highest worldwide, followed by the United States, Japan and China. 

The Korean government, which succeeded in coping with problems such as the structural imbalance between iron making, steel making and rolling, obsolete manufacturing facilities, and a lack of economy of scale, began to pursue qualitative growth of the industry from the mid 1980s. 

During the 1970s and 1980s, advanced economies’ steel manufacturing sectors went through large-scale restructuring, a series of corporate bankruptcies, and facility shutdowns due to the global economic recession. Meanwhile, that of Korea continued increasing its output, going for qualitative and quantitative growth at the same time in order to deal more effectively with its competitors. The rapid growth of the construction, automobile, machinery and electronics industries that continued from the 1980s to 1990s assisted the development of the sector as well, while the predecessor of POSCO built additional steel mills in Gwangyang City, South Jeolla Province and electric furnace manufacturers, thereby boosting production capacity. 

However, their fast growth led to trade conflict, with the increase in domestic demand slowing down. It was at this time that they turned their attention to the export of high value added products, diversification of export destinations, development of innovative technologies, and new types of products such as special steels. 

The industry underwent structural reorganization until the mid 2000s due to intensifying competition both at home and abroad. This was triggered by the Asian Financial Crisis in late 1997. No less than 11 steel manufacturing companies, including Hanbo Steel, Kia Specialty Steel and Sammi Specialty Steel, went under between 1997 and 1998, with crude steel production facilities with a combined capacity of five million tons shut down. 

Finally, the government stepped in to save the industry and seek new growth opportunities in the fast-changing global environment. Hanbo Steel was acquired by INI Steel, which isnow Hyundai Steel, in 2004; and marking the end of long inter-firm restructuring.Customs duties in the industry were abolished in January 2004, while the steel industry of China quickly emerged to accelerate the reshaping of the industry. 

At present, Korean steelmakers are exerting great efforts for technological advancement. POSCO completed the world’s first FINEX facilities in 2007, while Hyundai Steel finished construction of its second furnace to become the second steel manufacturer in Korea capable of integrated production. 

An increasing number of these companies, including POSCO, Dong Kuk Steel Mill, Dongbu Steel and Hyundai Hysco, are heading to overseas markets for cost reduction and capacity expansion, with local steel demand at its peak and India and China quickly raising their competitiveness. As of 2012, POSCO ranked fifth in the world in terms of steel production, with Hyundai Steel taking 17th spot. Six of the top 10 on the list were Chinese companies. POSCO is currently building manufacturing plants in Indonesia, Turkey and India, while Dong Kuk Steel Mill is setting up a factory in Brazil in conjunction with POSCO. Dongbu Steel is about to start local production in Thailand and Hyundai Hysco is constructing plants in Turkey and India. 

“Some people are expressing concerns that Korea’s steel-making industry could be sandwiched between those of advanced and developing economies, but it has overcome a series of difficulties such as the first and second oil shocks in the 1970s, the Asian Financial Crisis of 1997 and the recent global financial downturn,” said the Korea Iron & Steel Association, adding, “We believe that our ability earned through such experiences will lead to another renaissance in the industry.”