On July 14, those in the Korean steel industry all agreed that Article 232 of the "Trade Expansion Act" can deal a bigger blow to the Korean steel industry than the Korea-US Trade Agreement Act (FTA) which the US wants to revise. This is because even if the Korea-US FTA is amended, there will be no possibility that a principle of non-tariffs will be broken according to the rules of the World Trade Organization (WTO).
Article 232 of the “Trade Expansion Act” can lead to directly damaging Korean steelmakers as the act allows not only additional tariffs and limitations on imports but safeguards (emergency restrictions on import) which can lead to direct damages. The US market accounts for 12% of Korean steelmakers' annual exports.
Korean steelmakers are already having difficulty exporting to the US. This is because high tariffs were already imposed on almost all steel products such as hot-rolled steel, cold-rolled steel, steel plates, and steel pipes for oil wells. Exports to the US slid 4.4 percent year-on-year to 1.55 million tons from January to May. On a yearly basis, the figure also dipped from about 5.71 million tons in 2014 to about 3.74 million tons last year.
In particular, the highest tariffs were levied on both hot-rolled (60.93%) and cold-rolled steel plates (64.68%) of POSCO, forcing POSCO to give up new exports to the US. Hyundai Steel is reluctantly maintaining exports despite a sharp drop in margins. This is because Hyundai Steel can not immediately stop exporting as its exports go to Hyundai Motor Factory in Alabama and Kia Motors Factory in Georgia in the US. Hyundai Steel has exported 300,000 tons of hot rolled steel and 75,000 tons of cold rolled steel to the United States.
Under these circumstances, if additional regulations are given to Korean steelmakers in accordance with Article 232 of the Trade Expansion Act, they will have no choice but to relinquish steel product exports to the US market. The most vulnerable area will be the steel pipe industry. Most of Korean steel pipes are exported to the US. Most Korean steel pipes for oil wells are shipped to the US. During the January to May period, Korean steel pipes for oil wells accounted for 30% of Korea’s total steel product exports to the US. In the case of SeAH Steel, 30% of its products are exported to North America.
Above all, the Korean steel industry is concentrating their attention on the results of a retrial on hot-rolled and cold-rolled steel plates that will come out soon. In March, POSCO received a slightly lower tariff of 11.7% on thick plates compared to hot-rolled and cold-rolled steel plates. The tariff on the thick plates was far lower compared to other countries such as China. The Korean steel industry expects that the US will lower the level of countervailing duties in an annual review of cold-rolled and hot-rolled steel sheets scheduled for the second half of this year.