The South Korean steel industry is grappling with the influx of low-cost steel products from China. Due to the slowdown in the domestic construction sector, China is flooding the market with construction steel materials like hot-rolled steel sheets at competitive prices. Some experts suggest that to maintain competitiveness, the local steel industry must move beyond price competition and focus on improving quality.
While the import of low-cost construction steel from China is on the rise, it is hitting local manufacturers hard. Last year, the quantity of hot-rolled steel sheet imported from China to Korea increased by about 35% compared to the previous year, reaching approximately 1.42 million tons.
In the first quarter of this year, the import quantity stood at around 370,000 tons. This situation is putting pressure on the profit margins of local producers. While POSCO Holdings maintains an operating profit margin of around 3%, Hyundai Steel's margin hovers around 1.7%.
The reason behind China's export of construction steel materials abroad is the slowdown in the domestic construction sector. Statistics from China's National Bureau of Statistics indicate that the construction start area in China decreases by about 20% annually. However, despite 55-60% of steel produced in China being construction steel, the decrease in construction demand is leading to excess steel materials being directed towards exports.
Steel industry officials acknowledge their inability to compete with low-priced Chinese products and emphasize the importance of offering differentiated value to survive. Quality is particularly highlighted as a priority, especially for products directly related to safety, such as construction steel. Kwak No-seong, Honorary Professor of International Trade at Dongguk University, summarizes the situation by stating, "Producing quality products at competitive prices is the key to survival."
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