This Time a Coal Crisis... Korea Also on Alert as Prices Triple Compared to Early Year

Steel Industry and Government Also Watching Closely... "Impact Is Limited"
"Calls to Adjust Pace of Carbon Neutrality Policy Simultaneously"

[Asia Economy Reporters Heungsun Kim, Daeyeol Choi, Sangdon Joo, Hyunwoo Lee] As international coal prices have surged more than threefold since the beginning of the year, the domestic steel industry, which heavily relies on coal, is also on high alert. With international coal supply and demand expected to remain unstable until next year, the government and domestic steel companies are closely monitoring the situation.

According to the Wall Street Journal (WSJ) on the 6th (local time), the price of Australian Newcastle thermal coal, the benchmark for international coal prices, soared 12.29% from the previous day to $269.5 per ton. This is more than three times the $83.7 per ton price at the start of the year. As India, where thermal power accounts for over 70% of electricity production, faces a severe power shortage following China, countries worldwide are scrambling to secure stockpiles. WSJ quoted an industry insider saying, "It will take at least nine months or more for coal supply to stabilize."

The coal supply shortage, which began in power generation, is spreading to the steel industry. The domestic steel sector is closely watching recent developments, particularly focusing on the price trends of coking coal used in blast furnace steelmaking processes. Coking coal, along with iron ore, is a raw material directly linked to the profitability of steel companies. Although domestic steel companies have long-term trading relationships, making immediate supply disruptions unlikely, they view the ongoing high volatility as having a significant negative impact.

A POSCO official stated, "Raw coal required for steel production is procured through long-term contracts, so there are no major issues related to the recent global raw material crisis," but added, "We are monitoring to see if the situation worsens or spreads further."

A Hyundai Steel official said, "As coal prices rise, iron ore prices have fallen, somewhat offsetting the impact, so the overall effect on the steel market is expected to be limited," and added, "Since it is unlikely that unilateral import bans like those in China will be imposed, there is no significant immediate impact on operations."

The government is also closely watching energy supply and demand trends amid recent energy price increases. The Ministry of Trade, Industry and Energy recently held an emergency meeting to review energy supply and demand trends. At the meeting, Park Ki-young, the ministry’s second vice minister, said, "The international energy supply instability will have a limited direct impact on our country's energy supply situation for now," but emphasized, "Since unexpected situations could arise locally, such as prolonged crises, thorough management is required."

With coal prices soaring alongside fluctuations in raw material prices such as natural gas and crude oil, voices are emerging calling for a slowdown in the government's carbon neutrality policy. Ryu Seong-won, head of the Industrial Strategy Team at the Federation of Korean Industries, said, "Overall, coal prices have risen significantly, so South Korea, where coal-fired power accounts for 40%, cannot avoid being affected," and added, "Considering this international situation, the pace of carbon neutrality efforts should be adjusted accordingly."

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