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Local steelmakers unnerved by US tariff

The heads of local steelmakers held emergency meetings with the government, expressing grave concerns over the impact of the US‘ decision to slap a 25 percent tariff on steel products, though the degree of the anxiety differed slightly by the size of their businesses.

Heads of South Korea‘s steel companies held a joint meeting with the government representatives headed by Trade Minister Paik Un-gyu in Seoul, soon after US President Donald Trump signed on Thursday a 25 percent tariff on steel imports. He signed two proclamations -- one for steel and another for a 10 percent tariff on aluminum imports -- citing a threat to national security.

The US’ latest moves are expected to take a toll on sales of relatively smaller steelmakers, as they have a higher dependency on US exports.

Nexteel, for instance is heavily reliant on US exports with steel pipe and tube shipments there standing for 80 percent of its annual sales last year, followed by Husteel and Seah Steel.

Posco, South Korea’s leading steelmaker, and Hyundai Steel exports to the US account for a relatively lower 2 to 3 percent of total shipments.

Husteel CEO Park Hoon said, “Once the duties are levied, distributors will question whether to sell Korean products.“ Regarding his plans to diversify factories overseas Park said, ”We thought of going to south east Asia, but it is more difficult than expected. We also thought of entering Canada, but there isn’t as much volume as in the US.“

Representative from Seah Steel said ”This (the tariffs) will take a toll on the steel industry that is already suffering. It is regrettable.”

Kwon Soon-wu, an analyst of SK Securities who covers the steel industry, said, “The latest tariff will inevitably have a greater impact on relatively smaller local steelmakers such as Nexteel, Husteel and Seah Steel that have a higher dependency on US sales, compared to Posco and Hyundai Steel that have diversified business. Korean steelmakers will lose price competitiveness there.”

But some also expressed relief at the US move being “lighter” than the worst case scenario.

”We had initially thought the US could slap 53 percent duties on 12 countries. The final decision to levy 25 percent has reduced our burden,” said Hyundai Steel CEO Kang Hak-seok. 

Heads of South Korea's steel companies attended a joint meeting with government representatives headed by Trade Minister Paik Un-gyu on Friday in Seoul. (Yonhap)
Heads of South Korea's steel companies attended a joint meeting with government representatives headed by Trade Minister Paik Un-gyu on Friday in Seoul. (Yonhap)

Meanwhile, larger players took time to express regret and pledged to cooperate with government measures.

“The 25 percent duties that comes in addition to anti-dumping and countervailing duties levied, will hurt exports to the US,” Posco said.

“Posco will cooperate with the government for the US to exempt South Korea, its security ally. We will also try to exempt high grade steels that do not compete with steel mills there.”

Pushing ahead with the Section 232 of the Trade Expansion Act, the US has finalized to levy 25 percent tariff on steel products and 10 percent on aluminum products, with the exception of Canada and Mexico.

The Section 232 of the Trade Expansion Act of 1962 allows imposing tariffs or quotas on imports that threaten national security.

Korean steel products subjected to tariff adjustments account for 73.6 percent or $2.79 billion of steel shipments to the US, making the country the second most affected following Brazil, according to the Korea International Trade Association.

Korea’s steel pipe exports totaled 1.9 million tons in 2017, up 80.9 percent from 2015, according to data from the Korean Iron and Steel Association.

The KITA expects Korean steel pipes and tubes to be the most hit, as they make up about 20 percent of imported steel products in the US market.

Last year some $1.6 billion worth of steel pipes and tubes were shipped to the US, about 60 percent of the country’s total steel pipes and tube exports, the KITA said.

By Kim Bo-gyung (