South Korea’s steel supply and demand for the second half of 2018 is expected to continue its declining trend due to slowing recovery in private consumption and faltering corporate investment.
According to POSRI (POSCO Management Research Institute), South Korea’s domestic steel demand for steel is expected to decline by 1.3% to 27.42 MnT in H2 CY18 against the second half of 2017 amid tepid demand from automobile sector and contraction of the construction industry.
While South Korean automakers are currently grappling with weak demand and stiff competition in the major markets, country’s construction sector is facing a contraction in demand since 2017 due to government’s measure to stabilize property markets through tightened mortgage lending rules. In Aug’17 the South Korean government has announced plans to slash spending in social infrastructure by an average 7.5% annually for the coming five years to divert more money to social welfare. For 2018, the country’s government has lowered down its infrastructure budget by 20% against the previous year to USD 15.7 billion which marks the lowest amount in past 13 years.
South Korea’s domestic demand for steel for the annual year 2018 is expected to be around 53.79 MnT down by 4.6% against the previous year.
On the product-wise basis, the country’s demand for flat products is anticipated to fall by 0.7% whereas for long products demand is likely to plunge by 2.2% in H2 2018 against corresponding quarter of previous year.
With the slowing of country’s pipes and long product production and fall in its imports, it can be inferred that the country’s demand for steel pipes and long products is falling and will continue its plunge in H2 CY18.
Bleak outlook for export demand amid protectionism
In terms of export demand also, the outlook for South Korean steel in H2 CY18 looks grimmer after U.S. initiated protectionism is spreading across the globe.
In Mar’18 U.S., which was South Korea’s was one of the major steel importers had announced steep tariffs on steel imports. After U.S., the European Union has also decided to put a quota on Korean steel products under its safeguard plan from July 19. The Canadian International Trade Tribunal has ruled several Asian countries including Korea dumped and subsidized some steel products and harmed Canadian steel producers.
China has also initiated its anti-dumping probe into steel products from Korea and three other countries. This situation will have a harsh blow to South Korea’s steel industry as it has explored EU and Canadian markets as an alternative to stave off U.S. pressure.
Canada is the third largest importer of steel products from Korea after the U.S. and China. while EU is fourth with shipments of 3.5 MnT last year.
In case of U.S. post tariffs announcement, both the countries have agreed for the imposition of quota instead of tariffs. Adding to this two days back the United States has further relaxed this quota and has allowed South Korean steelmakers to apply for an exception from its import quota. This was done amid increasing complaints from American clients, which are now facing higher prices due to higher U.S. trade barriers.
But the South Korean steelmakers are not that happy in spite of the U.S. President’s change in stance. South Korea’s industry participants are of opinion that there is no guarantee that an application will actually lead to an exception. This is because after such applications, the U.S. government will talk with local companies, including steel suppliers as well as buyers and U.S. suppliers are obviously against lower trade barriers. Besides, even if this opposition is overcome, an actual exception is likely to take at least months.
Leave a Reply