Korean steelmakers face worst crisis since ’09 on poor demand at home and abroad

South Korean steelmakers are bracing for another round of a devastating slump in more than a decade with a plunge in both domestic sales and exports due to multiple whammies from flood damage to the country’s steel giant POSCO’s Pohang plant to global economic slowdown.

Global steel demand from January to September this year is estimated to have declined by 4.3 percent from the same period a year ago, according to the POSCO Research Institute. The industry is in for a deeper slump next year if the geopolitical risk from the Russia-Ukraine war and Europe’s energy crisis protracts and if Chinese economy does not recover.

Korean steel makers experienced a steep loss in the third quarter and faces bigger dip in the fourth quarter. They could enter a damaging crisis in the likes of 2009 amid global contraction from financial crisis.

At home, steelmakers were able to survive the first half of this year on active shipbuilding activity, but they would be hit by shrived construction activity due to property market slump.

Steel demand largely hinges on the construction industry.

Domestic steel sales this year are estimated to reach 53.2 million tons in total, larger than 49.2 million tons in virus-ridden 2020 but smaller than 56 million tons in 2021. Outlook for next year is equally gloomy as a recovery in steel demand from carmakers and constructors is forecast to be slow.

Steel exports also are projected to extend the losing streak and stop at 26 million tons this year, off 4 percent on year due to poor demand from major markets like China. The figure is the worst since 2010 when the country exported total 24.88 million tons.

“Exports are estimated to hover below 30 million tons for four consecutive years since 2020,” said Kong Moon-ki, an analyst at POSCO Research Institute.