Invest KOREA

The steel industry is a key industry that forms the backbone of the Korean economy that has supplied essential materials to various industries such as construction, automobiles, and shipbuilding, and played an essential role in economic growth. However, the recent rise in global environmental regulations and demands for carbon neutrality has led the steel industry to a new turning point. More specifically, the steel industry is asked to make advanced technological innovations and eco-friendly transitions in line with the development of low-carbon steel production technology and the rising demands for eco-friendly steel materials.

This report aims to present strategic directions for enhancing the competitiveness of the Korean steel industry by analyzing the latest industry trends and reviewing the industry outlook and government policies introduced to foster the steel industry. In addition, the author hopes to shed light on the roles that companies and the government should play in achieving carbon neutrality and developing high value-added products in the steel industry, and to contribute to finding ways for the steel industry to grow sustainably.

In 2024, the Korean steel industry is being influenced by the increase in global demand and rising raw material prices, which are making supply and demand and production even more complex. Global steel demand is expected to increase slightly from last year, with active economic activity in emerging countries, such as India's large-scale infrastructure investment, contributing significantly to the increase in demand. On the other hand, steel demand in Europe is expected to recover slowly due to the prolonged war between Russia and Ukraine and monetary tightening.

The Korean steel industry is showing different growth trends by steel consuming industries. The automotive industry is expected to grow slightly as the instability in semiconductor supply gradually eases and improves the operating rate, and the strong export continues. As a result, the demand for steel in the automobile industry is also expected to increase. On the other hand, the construction industry remains sluggish due to falling orders in the private sector, high interest rates, and rising material costs, and demand for steel products used in construction such as rebar is expected to decrease. The shipbuilding industry is expected to see a significant increase in the number of ships built, thanks to the growing demand for eco-friendly ships worldwide and the skill improvement of foreign workers. In particular, the demand for steel materials in the shipbuilding industry is growing significantly as strong demand for LNG carriers and ultra-large container ships continues.

In terms of steel supply and demand, the continued sluggishness of the construction industry is likely to dampen domestic demand for steel. In response, the industry is expected to see a slight increase in exports amidst sluggish domestic demand and efforts to stay competitive in the global market. Imports are expected to increase due to the continued influx of low-priced Chinese steel products. On the other hand, steel prices are likely to remain high throughout the year, driven by tight global supply and demand and rising raw material prices, which in turn will heavily influence domestic steel production.

Although global demand for steel is expected to continue growing in 2025, various factors such as the outcome of the US presidential election, economic policies and interest rates of countries, and ongoing supply chain issues are expected to affect the steel industry. More specifically, the steel industry needs to focus more on the transition to low-carbon processes and the development of eco-friendly products in the long term as major countries strengthen their environmental regulations. The Korean automobile and shipbuilding industries are expected to recover and see demands grow, and positively influence the domestic steel industry. On the other hand, the construction industry will continue to be burdened by high interest rates and material costs, which may slow down demand for steel materials.

The Korean government is introducing multifaceted support policies to make the domestic steel industry more competitive and achieve carbon neutrality. The main goals of the steel industry policy for 2024 include eliminating global carbon regulatory barriers and promoting the development of new steel materials. To that end, the government is focusing on supporting investments aimed at developing eco-friendly technologies so that the domestic steel industry can stay competitive as the world moves to achieve carbon neutrality. In addition, the government has announced the New Industrial Policy 2.0 to strengthen the competitiveness of major industries, including the steel industry, focusing on promoting private-led economic growth and strengthening market-based economic vitality. By implementing these policies, the government plans to help boost exports and investment, and promote the continuous innovation of the steel industry through the development of eco-friendly steel materials and AI convergence.

The main government support includes the development of hydrogen reduction steel technology to make the steel industry carbon neutral. Currently, the government is supporting hydrogen reduction steel projects led by major players such as POSCO, which is expected to achieve large-scale carbon reduction. The hydrogen reduction steelmaking process significantly reduces carbon emissions by using hydrogen instead of conventional coal in steel production and emitting water vapor instead of carbon dioxide. The government is shortening the relevant administrative procedures to ensure that hydrogen reduction steelmaking projects can be launched swiftly. The government also plans to provide various financial support such as expanding green financing and tax benefits. In addition, the government is adding budgets for the research and development of core technologies for carbon neutrality and promoting policies to encourage companies to invest in eco-friendly technologies.

In addition, building the steel scrap industry has emerged as an important task for actively recycling resources in the steel industry. Steel scrap is an essential raw material in making steel in electric furnaces, and its demand is expected to increase rapidly as countries strengthen their net zero policies. In response, the Korean government plans to include steel scrap as a recycled resource under the Waste Management Act and lay the institutional foundation for building the steel scrap industry and ensuring stable supply. These efforts will enable the government to build a systematic supply chain for steel scrap, and introduce advanced scrap sorting methods using AI technology to improve quality control and make supply more efficient.

The country’s major steel makers are also contributing to innovating the steel industry and meeting net zero goals. POSCO is currently carrying out hydrogen reduction steel projects in Gwangyang and Pohang, and plans to contribute to carbon neutrality by 2030. Hyundai Steel is accelerating the development of eco-friendly steel materials by adding LNG power generation facilities at the Dangjin Steelworks to get one step closer to net zero. With the support of the government, the industry leaders are actively developing high-value steel materials such as high-manganese steel and ultra-large diameter steel pipes. They are also committed to technological innovation needed to meet the demand for eco-friendly transformation in steel consuming industries, such as electric vehicles and shipbuilding.

In conclusion, the Korea steel industry has reached a new turning point as the world moves toward carbon neutrality and eco-friendly transformation. In response, the Korean government is actively supporting the development of eco-friendly technologies, such as hydrogen reduction steelmaking technology and the building the steel scrap industry, and industry leaders are also strengthening their global competitiveness by developing eco-friendly processes and high value-added products. Moving forward, the steel industry will need to achieve sustainable growth and strengthen its competitiveness in the global market through technological innovation and the establishment of a stable supply chain.