China’s Threat
The Korean steel market outlook is getting worse. Korean steel companies expected to gain some advantages upon the restructuring of the Chinese steel industry, but the production and exports of Chinese steel are rather increasing. Korean companies are being hurt by relatively cheaper Chinese steel in both the domestic and global markets.
According to the Chinese and Korean steel market on July 8, crude steel production in China from January to May this year increased 2.7 percent compared to the same period last year to 342.52 million tons. Daily crude steel production also increased 4 percent to 1.84 million tons.
Both production and exports of Chinese steel jumped up to 33.94 million tons from January to May this year, which is a 33.6 percent increase from the same period last year. Exports of Chinese steel products were steady until last year, but slowed down 13.2 percent in February this year, right after the 37.6 percent increase in January, due to the restructuring of Chinese steel companies. However, exports rebounded 28 percent in March, and even higher to 35.9 percent in April.
The price competitiveness of Chinese steel is also a serious problem. Exports to Korea increased the most, out of total exports from China.
In fact, total exports from China including steel products in May added up to US$195.472 billion, up 7 percent from May last year. But exports to Korea increased 11.9 percent to US$8.925 billion.
In case of hot rolled steel sheets, Korean companies' products are 70,000 to 80,000 won (US$69 to 78) more expensive per ton than imported ones. Imported products have even more price advantages recently due to the appreciation of Korean won. Practical burdens on Korean steel companies are inevitable.
An official working in the Korean steel industry said with worry, “Even though the Chinese government announced to restructure their steel facilities, Chinese steel is gaining more power in the global market. As Chinese steel accounts for almost half of total steel production worldwide, China has the price initiatives of both raw materials and final products.” He also commented, “The fact that China, the world’s top crude steel producer, is expanding production and exports is a great threat to Korean steel companies. Since efforts to minimize production costs has reached a limit, Korean companies need to come up with innovative strategies to be able to manufacture high-value products.”
Competition between Korean steel and cheaper Chinese steel is getting fierce in the overseas market as well. An official in the steel industry said, “Recently, Korean steel companies were sued for anti-dumping in Malaysia, and this is primarily because of cheaper Chinese products.”