SEOUL, December 18 (AJP) -Stagnation is set to extend into 2026 for Korean steelmakers as demand remains sluggish and global markets stay flooded with low-priced Chinese exports — a downturn severe enough to draw legal protection for the industry.
According to data compiled by the KCCI, steel output is expected to remain virtually unchanged at 63.9 million tons in 2026, extending a decline that has persisted since 2021.
Exports, which rose 1.5 percent this year to 28.8 million tons, are forecast to fall 2.1 percent to 28.2 million tons next year, as Chinese mills accelerate overseas shipments while the United States and Europe harden trade barriers.
The prolonged slump in construction and automobiles continues to weigh heavily on domestic steel consumption. Apparent steel consumption fell 9.1 percent to 43.4 million tons in 2025, with only a modest 1.2 percent rebound expected in 2026.
Construction investment has been in retreat, with building starts through September down 4.6 percent year-on-year. Automotive production through October also slipped 1.5 percent, compounding weakness in flat products such as hot-rolled coil and thick plates that are closely tied to construction and manufacturing demand.
Steel imports fell 8.7 percent to 13.4 million tons in 2025, reflecting softer demand and the impact of anti-dumping measures. Even so, China's share of Korea's steel imports surged to 62.2 percent, up sharply from 47.7 percent in 2022, intensifying concerns that low-priced Chinese products continue to undercut domestic producers.
Data from the Korea Iron and Steel Association show Chinese steel imports nearly quadrupled from 338,000 tons in 2021 to 1.26 million tons in 2023. Hot-rolled coil imports reached 1.53 million tons in the first 11 months of 2023 alone, with Chinese products priced up to 30 percent below Korean equivalents.
The pressure has been especially severe for specialized producers. SeAH CSS, a major maker of special steel bars, saw operating profit plunge 91 percent, from 125.7 billion won in 2022 to 11.4 billion won in 2024, as Chinese special steel bar imports jumped 50 percent over two years to 670,000 tons, accounting for 92 percent of total imports in the category.
Two headwinds define 2026
The outlook for 2026 is shaped by two overriding challenges: China's relentless outbound push and escalating trade walls in advanced economies.
China's steel production capacity still far exceeds domestic demand, forcing mills to ship out excess supply and further depress prices. This erodes the competitiveness of Korean producers, which tend to compete on quality and specialized grades rather than volume.
Beijing said in March it would aim to cut annual crude steel output by about 50 million tons, potentially bringing production below 1 billion tons for the first time in six years.
POSCO Group said during its third-quarter earnings call that it expects Chinese output to decline about 5 percent this year and possibly 10 percent next year, though skepticism remains after past pledges failed to meaningfully absorb oversupply amid a prolonged property downturn.
At the same time, the United States and the European Union (EU) are tightening import controls. Washington imposed 50 percent tariffs this year on steel and aluminum derivatives, scrapping a quota system that had allowed Korea limited duty-free volumes and forcing Korean suppliers to compete more directly on price.
In Europe, the Carbon Border Adjustment Mechanism (CBAM) is moving closer to full implementation, imposing carbon-based costs on imports. The EU remains Korea's largest regional steel export market, with shipments totaling $4.48 billion last year, slightly ahead of the United States at $4.35 billion.
A rare legislative breakthrough in late November injected cautious optimism into the industry. The National Assembly passed the "Special Act on Strengthening Steel Industry Competitiveness and Carbon Neutrality Transition," widely known as the K-Steel Act, marking the first comprehensive government support framework for the sector.
The law establishes a special committee under the Prime Minister's Office and mandates five-year master plans and annual roadmaps by the Ministry of Trade, Industry and Resources. Crucially, it allows coordinated capacity reductions and production cuts without triggering antitrust penalties — a long-standing obstacle to industry-wide restructuring.
"Article 38, which provides an antitrust exemption for joint production adjustments, gives companies legal cover to coordinate capacity cuts in response to oversupply," said Kwon Ji-woo, an analyst at Hanwha Investment & Securities.
The act also includes measures aimed at shielding domestic producers from unfair imports and calls for national infrastructure planning for hydrogen pipelines and power grids, both seen as essential for hydrogen-based steelmaking and expanded electric-arc furnace capacity.
Industry officials caution that legislation alone will not reverse structural headwinds, but welcomed the framework as a foundation for coordinated action that could reshape the competitive landscape from 2026 onward.
Hyundai Steel bets on U.S. expansion
Against the domestic malaise, Hyundai Steel is moving to deepen its U.S. footprint. The company said it will form a joint venture with POSCO Group to build a 2.7-million-ton electric-arc furnace mill in Louisiana, targeting automotive steel demand tied to Hyundai Motor Group's expanding U.S. manufacturing base.
The $5.8 billion project will be funded equally through equity and external borrowing and will produce hot-rolled and cold-rolled coil for Hyundai Motor's Metaplant America in Georgia. The plant began mass-producing the Ioniq 5 in October 2024 and is ramping toward a long-term capacity target of 1.2 million vehicles annually.
The mill is slated to come online in 2029, positioning Hyundai Steel to navigate rising protectionism and intensifying competition in North America, including changes triggered by Nippon Steel's $14.9 billion acquisition of U.S. Steel.
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