- Government targets reduced steel output while promoting high-quality products.
- Specialized steel is demanded for defense, energy, and construction sectors.
- Incentives support mergers, asset consolidation, and stronger mill growth.
South Korea intends to implement a comprehensive overhaul of its steel sector, featuring government-supported initiatives for reducing production and enhancing the output of premium specialty products, as global excess supply and competition from China challenge one of the nation’s fundamental manufacturing industries.
The Ministry of Trade, Industry and Energy plans to release a restructuring plan by the end of this month, following suggestions from the steel industry competitiveness task force, which includes government officials, academics, and consultants such as Nomura Securities, sources revealed on Thursday.
The task force has performed an extensive evaluation of both domestic and international demand for steel products in shipbuilding, automotive, and construction, along with reviews of production capabilities.
Central to the strategy are cuts in the production of reinforced bar, or rebar, heavy plates, structural steel, and flat steel, along with a government-supported initiative to enhance product quality. The action comes after a comparable reorganization initiative by the nation’s petrochemical producers to reduce their naphtha-cracking capability by as much as 25% due to an industry downturn.
Steel firms that do not comply with updated requirements for strength, heat resistance, and durability could face pressure to reduce output or potentially close facilities, as sources indicated that incentives would be provided for mergers and asset consolidation.
Sources indicated that blast and electric furnaces are likely to be preserved due to the efficiency of operators such as POSCO, South Korea's steel producer, and their significance to national supply chains.
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Industry representatives noted that medium-sized producers concentrated on rebar encounter the most challenging outlook. To facilitate the transition, policymakers are considering a “steel co-prosperity fund,” which would allow more robust mills to gain state assistance to acquire and shut down the assets of weaker competitors while taking in their workforce, sources reported.
The government and industry recognize potential in shifting from standard steel to specialized, higher-margin items such as earthquake-resistant rebar, ultra-high-strength beams for skyscrapers, or specialty plates for LNG carriers and ammonia tankers.
Demand is also growing in defense and energy, encompassing armored steel as well as alloys for small modular reactors and hydrogen facilities. Japan’s approach is referenced as a guide: integrating capacity reductions with enhanced products and stricter standards that excluded inexpensive imports while securing international clients. Seoul is contemplating comparable actions, such as more stringent rebar standards that would automatically eliminate Chinese suppliers.