Business Environment Changes
Reshoring by Korean steelmakers is growing.
KG Dongbu Steel decided on Nov. 2 to liquidate its plant in Jiangsu Province, China, and return to Korea, according to the Korea Iron & Steel Association (KOSA) on Nov. 16.
KG Dongbu Steel said it plans to invest 155 billion won in Dangjin, South Chungcheong Province to produce cold-rolled and plated products. It is the largest U-turn by a Korean company since the outbreak of COVID-19. The steelmaker operates a steel mill in Dangjin.
In May, Aju Steel, which is headquarted in Gumi, North Gyeongsang Province, decided to liquidate its Philippine plant and produce steel sheets for electronics and dry materials in Gimcheon, North Gyeongsang Province. Aju Steel became the No. 1 U-turn company in the Korean steel industry.
Korean steelmakers are reshoring as it has become more advantageous to produce steel products in Korea due to the spread of protectionism and an oversupply in the global market.
"In addition to KG Dongbu Steel and Aju Steel, two to three mid-sized steelmakers are considering making a U-turn to Korea," a KOSA official said. "Korean steelmakers’ U-turns will increase as the Ministry of Trade, Industry and Energy has recently introduced a U-turn subsidy system."
Under the subsidy system, up to 30 billion won in subsidies is provided to a company which makes a U-turn to Korea and build a factory in a provincial area. The government also covers returning companies’ costs for plant site acquisition, plant construction and relocation costs up to 44 percent. In addition, U-turn companies can enjoy benefits such as employment subsidies, corporate tax cuts, tariff reductions, package support for smart factories and restructuring consulting.