Plummeting Chinese low-priced steel… Korea raises tariff barriers

A 'tariff barrier' to push out low-priced Chinese steel from the domestic market is rising rapidly. Anti-dumping measures, initially targeting plate products such as hot-rolled coils and cold-rolled sheets, are expanding to include surface-treated steel sheets and special steel bars. After more than a decade of regulation, tariff barriers on Chinese H-beams are expected to be extended for another five years. Although the Chinese steel industry has launched joint production cuts to address oversupply, weak domestic demand and high inventory levels persist, leading analysts to predict that downward pressure on low-priced exports will not ease in the short term.

According to the steel industry on the 25th, the Ministry of Trade, Industry and Energy's Trade Committee made a preliminary ruling on the 17th that China's special steel bar imports were dumped, causing substantial injury to domestic industries. The committee recommended to the Minister of Economy and Finance that provisional anti-dumping duties ranging from 25.08% to 27.96% be imposed on Chinese products. This follows applications for anti-dumping investigations filed in February by SeAH Steel and SeAH Changwon Special Steel. The Trade Committee plans to hold a public hearing and conduct additional investigations this December, with a final ruling expected in February next year.

This move extends the recent series of trade remedy measures against Chinese steel. Special steel bars are used in manufacturing components for automobiles, construction machinery, shipbuilding, bearings, and industrial machinery. Recently, imports of Chinese products have surged rapidly. According to Hana Securities, imports of Chinese special steel bars increased by approximately 50%, rising from 453,000 tons in 2022 to 676,000 tons this year. As low-priced products flooded the domestic market due to China's oversupply, Korean steel companies have filed successive anti-dumping investigations for various product categories, broadening the scope of regulatory targets.

Following last year's decisions on anti-dumping measures against Chinese stainless steel hot-rolled sheets and carbon/alloy steel hot-rolled sheets, the government expanded its regulatory scope this year to include Chinese hot-rolled coils. Anti-dumping duties were calculated at 21.62% for stainless steel hot-rolled sheets and up to 34.10% for hot-rolled sheets. For Chinese hot-rolled coils, anti-dumping duties ranging from 28.16% to 33.10% were determined. In April this year, the government also received a preliminary affirmative ruling that Chinese galvanized and zinc-alloy surface-treated cold-rolled steel sheets caused injury to domestic industries due to dumping. Consequently, since June, provisional anti-dumping duties ranging from 22.34% to 33.67% have been imposed on Chinese products.

Trade barriers against Chinese H-beams, which have been under regulation for over a decade, continue. On the 17th, through its second termination review, the Trade Committee determined that terminating existing measures would likely lead to a recurrence of dumping and injury to domestic industries. It recommended extending price undertakings and imposing anti-dumping duties ranging from 28.23% to 32.72% for the next five years.

Concerns over oversupply and tariff barriers are growing within China's steel industry, prompting calls for production cuts. The China Iron and Steel Association recently announced the 'Steel Industry Production Control and Inventory Reduction Voluntary Regulation Initiative,' involving 45 steel companies including Baowu, Ansteel Group, HBIS (Hebei Iron & Steel), and Shougang Group. The initiative aims to adjust production according to market demand, reduce high inventory levels, and refrain from engaging in low-price sales competition below cost. China's joint production cuts signal the severity of its oversupply problem.

Although China's steel industry has initiated production cuts, it remains uncertain whether oversupply pressures will ease in the short term. The pace of declining domestic steel demand in China is outpacing the rate of production reductions, and inventory levels remain high. Given that China's oversupply has led to low-priced exports, burdening the domestic steel market, Korean steel companies are closely monitoring the actual scale of China's production cuts and changes in export volumes.

Park Sung-bong, a researcher at Hana Securities, stated, "Chinese special steel bars account for 90% of total imports, acting as a disruptive factor in Korea's special steel supply-demand balance." He added, "Although the final ruling on anti-dumping measures against Chinese special steel bars is scheduled for February next year, if provisional duties are confirmed, imports from China will decrease immediately, which is expected to have a positive impact on the domestic special steel market."