Following Hyundai Steel, Dongkuk Steel Halts Operations... A Signal of 'Restructuring' in the Rebar Market

Dongkuk Steel Halts Incheon Plant Operations; Hyundai Steel Suspends Shipments
Construction Slump and Rising Costs Leave "No Reason to Endure"
Annual Output May Fall Below 7 Million Tons... Calls Grow for Direct Supply Expansion

The domestic rebar industry is facing a growing sense of structural crisis. Following Hyundai Steel's suspension of rebar shipments to distributors, Dongkuk Steel has also decided to completely halt operations at its Incheon plant, leading industry observers to assess that the entire market has entered a phase of supply and demand restructuring.

According to industry sources on May 26, Dongkuk Steel plans to shut down both the electric arc furnace and rolling mill at its Incheon plant for one month between July and August. This plant is the largest single steelmaking site in Korea, with an annual rebar production capacity of 2.2 million tons, accounting for about 40% of the company's total sales. This decision is interpreted as a signal of a structural supply and demand overhaul in the rebar market, going beyond a simple reduction in output. Since June last year, Dongkuk Steel has already been operating the Incheon electric arc furnace only at night while keeping it idle during the day. However, with no improvement in market conditions, the company ultimately decided on a full shutdown.

Rebar is being produced at Dongkuk Steel's Incheon plant. Photo by Dongkuk Steel

An industry insider stated, "They have concluded there is no longer a reason to endure in this market," adding, "At this point, reducing losses is more important than production volume." Previously, Hyundai Steel also suspended shipments of certain rebar types to distributors starting from May 9. Although the methods differ, both companies' decisions reflect a sense of structural crisis in the rebar market and are expected to have a significant impact across the industry.

Both companies cite the prolonged downturn in the construction sector and rising cost pressures as common reasons behind these measures. Rebar demand has been declining since the second half of 2022, when the construction market began to falter, and this slump has continued without a rebound. In addition, increases in industrial electricity rates and raw material prices, including scrap metal, have pushed steelmakers into a "negative margin" structure, where producing more leads to greater losses. Currently, the rebar price in the distribution market stands at around 750,000 won per ton, which is below the average break-even point (BEP) of 800,000 won per ton.

This trend is also reflected in the statistics. The Construction Business Survey Index (CBSI) for April, published by the Korea Institute of Construction Industry, was 74.8, far below the baseline of 100. A CBSI above 100 indicates that more companies feel business conditions have improved compared to the previous month. The construction downturn has also led to a decrease in domestic rebar production. According to the Korea Iron & Steel Association, production dropped from 9.49 million tons in 2023 to 7.79 million tons this year, a decrease of about 18%. As of March this year, cumulative production was only 1.73 million tons, raising concerns that annual output could fall below 7 million tons.

View of Hyundai Steel Incheon Plant in Donggu, Incheon Photo by Yonhap News

The reduction in production could affect not only short-term profitability but also the medium- to long-term supply and demand for rebar. If the construction market rebounds in the future, this could lead to supply-demand imbalances and sharp price increases. Industry voices are calling for survival strategies that both reduce cutthroat competition among suppliers and pursue export expansion and cost reduction. An industry insider said, "There is no reason to maintain market share at the cost of losses," adding, "The supply structure needs to be reorganized to restore appropriate production and price levels."

Recently, rebar industry leaders reportedly held a meeting where they listened to expert forecasts on the future of the construction market. This gathering was held as a study session to review the current state and outlook of the construction industry.

The industry also believes that government-level policy responses are necessary. There are growing calls for measures such as improving distribution structures, adjusting industrial electricity rates, and supporting rebar export expansion to stabilize market prices and prevent supply chain collapse. A steel industry official emphasized, "Rebar is an essential material for public infrastructure and housing construction. A market collapse could impact not only the steel industry but also the entire construction sector, so the government must take steps to stabilize supply and demand."

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