Vice Minister Ki-jae: "Domestic Steel Supply Instability May Partially Reflect in Consumer Prices"

"Forming Interdepartmental Inspection Team to Check Market Disruption Acts Such as Hoarding"
"Support Including Expansion of Loans for SME Raw Material Purchase Payments"

Lee Eok-won, First Vice Minister of the Ministry of Economy and Finance, presiding over the 18th Policy Review Meeting on the 21st. (Photo by Ministry of Economy and Finance)

[Sejong=Asia Economy Reporter Moon Chaeseok] Amid a 'rebar crisis' caused by soaring rebar prices at construction sites and elsewhere, the government announced on the 21st that "there will be uncertainties in the domestic steel supply and demand for the time being." It also noted that the rise in raw material prices could be reflected in consumer prices of durable goods in the future, potentially leading to inflation.

Lee Eokwon, the 1st Vice Minister of the Ministry of Economy and Finance, made these remarks during the '18th Innovation Growth Strategy Review Meeting, Policy Review Meeting, Korean New Deal Review Meeting, and the 12th Vice Ministerial Meeting on Prices' held at the Government Seoul Office that morning.

Vice Minister Lee explained, "Recently, The Economist in the UK described the current situation, where demand rapidly recovers after being depressed by COVID-19 but supply cannot keep up with demand, as a 'bottleneck economy'." He added, "Demand for raw materials such as crude oil, steel, and copper is rapidly increasing due to major countries' economic stimulus measures and the transition to eco-friendly trends, but the pace of supply recovery is insufficient to meet demand, causing prices to recover to or exceed pre-COVID levels."

He assessed, "Raw material prices, which plummeted due to COVID-19, surged sharply since the second half of last year, increasing corporate cost burdens all at once. Temporary bottleneck phenomena and market-disturbing activities such as hoarding could pose additional burdens on our companies."

Vice Minister Lee noted, "While the possibility of supply disruptions in crude oil and non-ferrous metals is low, domestic steel production has faced supply difficulties due to rising steel prices in China and reduced production in Japan, leading to decreased supply of imported steel products." He added, "There will be uncertainties in the domestic supply and demand situation for the time being."

He also stated, "It is understood that small and medium-sized enterprises are having difficulties reflecting the rise in raw material prices in their delivery prices. There is also a possibility that the increase in raw material prices will be partially reflected in consumer prices of durable goods with a time lag."

The government plans to actively respond to ensure that the recently soaring raw material prices do not become a risk factor for the recovering Korean economy. First, it intends to flexibly operate stockpiled materials it holds and alleviate companies' purchasing burdens through discounted and credit releases.

For items with unstable supply and demand such as steel, the government announced plans to encourage the industry to expand production and secure domestic supply by converting export volumes to domestic sales. Regarding market-disturbing activities like hoarding, a joint inspection team from related ministries will be formed to check abnormal distribution situations and ease excessive demand.

Vice Minister Lee said, "To support small and medium-sized enterprises facing difficulties, we will expand loans for raw material purchase payments, activate joint purchases by SME associations and organizations, and support delivery price negotiations through the Korea Federation of SMEs."

He added, "In the long term, efforts will continue to enhance our industrial structure's resilience to raw material price fluctuations by transitioning to a carbon-neutral and resource-circulating structure."

This content was produced with the assistance of AI translation services.