Steel exports to the US shrink by 30%... EU and Japan gain stronger price competitiveness

Still Blocked by Quota System for Korea

2018 US Steel Exports 2.5 Million Tons
Significantly Down from 3.54 Million Tons in 2017 Before Quota Introduction
Steel Demand Uncertainty Continues This Year
Urgent Negotiations Needed to Abolish US Quota System

Korea's Issues with Chinese Steel Imports Persist
US Likely to Pressure for IPEF Participation to Contain China

As the United States reached an agreement to resolve steel tariff disputes with Japan following the European Union (EU), domestic steel companies face the risk of losing their foothold. With exports to the U.S. already shrunk by nearly 30% due to quota restrictions, increased price competitiveness of steel from rival countries like the EU and Japan will inevitably cause further damage. South Korea, which opted for a quota system instead of tariffs in 2018, has requested negotiations with the U.S. to abolish the quota system, but progress remains sluggish.

Amid ongoing U.S.-China conflicts under global protectionism, trade issues in the steel industry have emerged as a priority. The global steel oversupply has not been resolved, and post-COVID-19 worldwide supply chain bottlenecks have raised inflation concerns, creating a chaotic environment surrounding steel exports.

Stagnation in U.S. Market Expansion Since Quota System Introduction in 2018

According to local media including Bloomberg on the 7th (local time), the U.S. agreed to suspend the 25% tariff on a certain amount of steel imports from Japan, while imposing a 25% tariff on quantities exceeding that amount. This approach is similar to the resolution of the steel tariff dispute between the U.S. and the EU last October. With the U.S. resolving steel disputes with Japan following the EU, the crisis sentiment among domestic steel companies has intensified due to the potential significant impact on exports to the U.S. caused by decreased price competitiveness.

According to the Korea Iron & Steel Association, before the introduction of the quota system, steel exports to the U.S. in 2016 and 2017 reached 3.74 million tons and 3.54 million tons respectively, but decreased to 2.5 million tons in 2018 after the system was implemented. The export volume further dropped to 1.94 million tons in 2020 amid the COVID-19 pandemic but somewhat recovered to 2.69 million tons last year.

Steel pipes, which heavily depend on the U.S. market, exported 980,000 tons last year, staying below the quota limit of 1 million tons.

With steel demand expected to continue growing despite uncertainties this year, recovery of exports to the U.S. is crucial. The World Steel Association predicted in October last year that global steel demand would increase by 2.2% from the previous year to reach 1.896 billion tons this year. Major exporters to the U.S. market include POSCO, Hyundai Steel, Dongkuk Steel, and SeAH Steel, exporting products such as oil well pipes and automotive steel sheets. An industry insider said, "Even if the global steel market improves, Korea cannot export steel to the U.S. beyond the quota," adding, "Re-negotiation of Section 232 of the Trade Expansion Act sanctions is urgent."

Park Seong-bong, a researcher at Hana Financial Investment, explained, "With international oil prices expected to remain strong, domestic demand for energy-use steel pipes in the U.S. is projected to continuously expand. In the case of SeAH Steel, exports of energy-use steel pipes to the U.S. are limited to an annual quota of 270,000 tons, so there is no room to increase exports, but the possibility of easing import restrictions on Korean steel cannot be ruled out."

U.S.-China Conflict Persists... Issues of Global Oversupply Remain

Since the Biden administration took office, instead of imposing multilateral sanctions on Chinese iron ore, efforts have been made to suppress exports of Chinese steel products through carbon reduction policies. Accordingly, the South Korean government plans to more strongly request renegotiations. With the U.S. having reached agreements with Japan following the EU, it is interpreted that conditions are now set for discussions with the South Korean government, which chose the quota system.

An official from the Ministry of Trade, Industry and Energy stated, "We visited Washington D.C. last month to convey domestic companies' concerns regarding Section 232 of the Trade Expansion Act," adding, "If prompt discussions are necessary, we are prepared to revisit the site and proceed with renegotiations."

However, there are considerable expectations that negotiations will not be easy due to the ongoing issue of Chinese steel imports, which the U.S. has raised with the South Korean government. Especially, following the resolution of steel tariff disputes between the U.S. and Japan and agreements on measures to curb Chinese steel, significant burdens are also placed on South Korea.

The steel industry and economic circles anticipate that the U.S. will resume negotiations on the condition of South Korea's participation in the Indo-Pacific Economic Framework (IPEF). IPEF is an economic alliance led by the U.S. to counter China in the battleground of U.S.-China competition.

Professor Jeong In-kyo of Inha University's Department of International Trade said, "Currently, the trade topic the U.S. is most focused on is IPEF, but our government is taking an ambiguous stance on it," adding, "If our government clearly states its position on this, there may be a path to resolve trade issues such as steel tariffs that we hope to address."

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