Korea's Steel and Aluminum Exports Likely to Be Affected
The European Union’s Carbon Border Adjustment Mechanism (CBAM) is likely to adversely affect South Korea’s exports in the industries including steel and aluminum. The test implementation of the mechanism is scheduled for October next year and it will be fully implemented in 2026. The climate change response mechanism targets the six industries of steel, aluminum, cement, fertilizer, electricity and hydrogen.
According to the South Korean government, steel exports from South Korea to the European Union are large in amount, South Korean steelmakers emit a lot of carbon dioxide in their processes, and the same applies to South Korean aluminum suppliers. Last year, South Korea’s steel and aluminum exports to the European Union totaled US$4.3 billion and US$500 million, respectively. Plastic and organic chemical products are slated to be included in the targets and the impact on South Korean manufacturers is likely to increase.
South Korea is planning to deal with the impact by further developing carbon reduction technologies. In this context, 209.7 billion won will be invested in the steel sector from 2023 to 2030.
The investment is to replace blast furnaces with electric furnaces in order to reduce carbon emissions during steelmaking. In addition, the investment will go to hydrogen reduction steelmaking so that one million tons can be produced by the method in 2030. “POSCO is already partially using hydrogen in its processes and, as such, the goal of commercial hydrogen reduction steelmaking can be reached within years,” the government said.
At the same time, the government decided to expand green finance from 3.8 trillion won to 9.4 trillion won next year so that more investment can be made in carbon neutrality infrastructure establishment. The Ministry of Trade, Industry and Energy will form a task force with the Ministry of Economy and Finance, the Ministry of Environment and the Ministry of Foreign Affairs in order to seek countermeasures.