KOSA – August’23

1. Growing Import Trend of Steel Material in 1H’2023

- Increase of imported steel in Korean domestic market & recovery of steel demand in several
sectors especially in shipbuilding and automotive, sluggish demand from construction sector
have become hot topic in 1H’23.
Reasons of import increase in 1H’23

- Total steel import in 1H’23 increased by more than 10% y-o-y to 8.3 Mt or 10-20% higher than
volume of 1H after pandemic. China & Japan took up more than 90% of total import orginal
countries in which each import rose by 37% and 8% y-o-y respectively but countries which
relatively located farther like Taiwan, Vietnam, and Indonesia recorded decrease by -38%, -49%,
and -73% respectively.
- The higher import from China and Japan is due to relatively weakening exchange rate which
cause lower export price from both countries. So Korea ended up import much from both
countries to replace import from Asean countries.
- Another major reason is due to wider price gap of domestic product & import products amid
higher import volume.
- It can be seen that for certain major product categories, imports have increased compared to the
first half of last year. Items such as COR-TEN (weathering) steel plates, steel rods, steel plates
for shipbuilding, and cold-rolled steel plates have seen increases in imports. On the other hand,
items with a relatively high construction demand such as H-beams, reinforcing bars, and colored
steel plates have shown a clear decreasing trend.
- Particularly noteworthy is the substantial increase of 84.8% y-o-y in imports of weathering steel
plates due to a shift in production facilities towards meeting the rising demand for nickel-plated
steel plates that is a secondary battery raw material, resulting in a significant supply shortage
exceeding the pre-pandemic levels.
- Similarly, imports of electrical steel plates, which started to surge in the latter half of last year
due to the electric vehicle boom, showed a 16.4% increase compared to the same period last
year. However, this level of increase is still over 50% higher than the pre-pandemic levels.
- Furthermore, other items such as steel rods, zinc-coated steel plates, and cold-rolled steel plates
have exhibited a high growth rate of 20-40% compared to the same period last year. It is
important to note that these growth rates are relatively lower than the pre-pandemic import
levels, as illustrated in Figure 2.
Enhancing cooperation upstream-downstream and preparation of exchange rate fluctuations

- In this context, as the situation sees an increase in low-cost imports, the steel industry needs to
focus on enhancing cooperation with both upstream and downstream related industries.
- Firstly, in the second half, there's potential for the shipbuilding industry, which has secured stable
shipbuilding orders centered around high value-added vessels, to expand its imports beyond 2
million tons, which is the highest level since 2017. Particularly, if the trend of declining Chinese
prices continues, it can be leveraged as a negotiation tool for imported steel negotiations, thus
emphasizing a robust mutual cooperation with the shipbuilding industry and jointly exploring
options for expanding the utilization of domestic products in the domestic market.
- Furthermore, as the second half is expected to continue facing a subdued construction market
due to risks associated with real estate trust fund loans and delayed construction projects, the
 construction sector may also consider expanding import product to enhance profitability. From
this perspective, the industry needs to monitor to prevent the inflow of unsuitable imported steel
products, such as construction steel including H-beams, into construction sites to ensure public
safety.
- However, the most significant external variable in steel imports for the latter half of this year is
likely to be exchange rate fluctuations in major countries. The recent decision by the Chinese
government to maintain the benchmark interest rate at 3.55% in response to the continued
sluggishness in domestic demand, including real estate, and market expectations of further
weakening of the yuan have raised concerns about the possibility of the USD-CNY exchange
rate re-entering historically low levels of around 7.2.
- Similarly, although the Japanese government recently adjusted the direction of its monetary
policy toward tightening, resulting in temporary yen appreciation, the market expects a sustained
weakening of the yen due to easing policies to maintain a 2% inflation target rate for the latter
half of the year.
- Given the potential for ongoing yuan and yen depreciation, if local steel demand continues to
remain weak, there's the possibility of an increase in imports of low-cost products into the
domestic market. Hence, the industry needs to keep an eye on domestic and international
variables in the second half.