Posted on 25 Dec 2024
Last Thursday's announcement by South Korea's second largest steel company, Hyundai Steel, that it had filed a formal complaint with the Korean government alleging that Chinese and Japanese steelmakers were dumping carbon steel hot-rolled coils (HRCs) in Korea has caused surprise and shock in Japan whose HRC export trade to South Korea occupied a huge chunk of the $7.78 billion Japan earned from HRC exports worldwide last year.
"Hot-rolled coil exports to South Korea, which amount to nearly 2 million tonnes per year, is a trade that can be said to be the 'main artery' of Japan's steel exports, and (Hyundai's filing) is a move that crosses the line and is shocking to those involved in the steel trade," Japanese industry daily, Tekko Shimbun, commented.
Hyundai Steel announced on December 19 that it had asked the Korea Trade Commission, under the Ministry of Trade, Industry & Energy (MOTIE), to impose a trade remedy (antidumping duties) on imports of China- and Japan-origin HRCs, claiming that its business was being "materially injured by unfair trading practices". The provisional AD margins that Hyundai sought against Japanese HRCs have not been revealed yet, according to Japanese sources.
Korean sources note that during the years 2020 through 2022, Korea's HRC imports averaged about 2 million t/y but that last year these had soared to 3.6 million tonnes. The volume this year is expected to dip to around 3.3 million tonnes, but imports will account for about 37% of the domestic market, compared with only 24% in 2020, at a time when the country's two dominant makers – Hyundai Steel and POSCO – are struggling.
South Korea's crude steel production during January-September this year totalled 47.64 million tonnes, the lowest level in 14 years, Business Korea magazine quotes Korea Iron & Steel Association statistics as showing.
Meanwhile, Japan Iron & Steel Federation (JISF) statistics show that during January-October this year, the Japanese mills exported 1.45 million tonnes of HRCs to South Korea, lower by a large 19.3% on year. However, Korean industry daily, Steel & Metal News, suggests that the issue is not just tonnage but also price.
S&M News argues that over the two months of September and October this year, Japan's domestic HRC price was the equivalent of $720-750/t but the import price of Japan-origin HRC in Korea averaged $492/t, a four-year low, based on the entry report in November on contracts signed between September and October. Indeed, the JISF data show that during October, the average unit price of the 122,700 tonnes of HRCs Japan shipped to Korea that month was low at $496/t FOB.
Hyundai Steel has been active in targeting steel imports this year, having persuaded the KTC in October to begin a probe into imports of heavy plates from China, claiming that a flood of plate imports "caused by China's delayed economic recovery and overproduction" had resulted in financial harm to the country's heavy plate producers, as Mysteel Global reported.
Japanese sources point out that in July when Hyundai Steel had lodged its plate dumping petition with the KTC, POSCO and Dongkuk Steel, Korea's two other heavy plate makers, had not joined the suit. The Japanese had been curious to learn whether the Korean government would accept a petition from an individual company, but three months later, they got their answer: Hyundai's request was indeed accepted and the KTC probe begun. "This 'success experience' and the continued slump in Hyundai Steel's business performance seem to have increased the momentum for further AD lawsuits by Hyundai Steel," the sources suggest.
Though Hyundai Steel's move has unsettled the Japanese mills, for now the Japanese are hopeful the issue can be resolved amicably. To begin with, though the Japanese and Korean mills have traded allegations in the past and threatened to launch trade cases, these have been rare. One reason cited for this is that almost every year for decades, the Japanese and Korean mills (and their respective government administrators) convene for a one-day 'Steel Dialogue' where trade issues are raised and the friction generally dissipated.
Japanese sources say the mills are considering asking Japan's Ministry of Ministry of Economy, Trade and Industry to liaise with MOTIE to bring forward the next Japan-Korea Steel Dialogue ahead of schedule so that the HRC issue can be discussed. This year's Dialogue was held in April.
The Tekko Shimbun also noted that Korean re-rollers have close ties with Japanese mills and use Japanese HRC in their cold rolling and coated sheet operations and would likely be opposed to the imposition of dumping duties. For example, coated sheet producer KG Steel – the former Dongbu Steel, whose cold-rolling and painted sheet plant lies in the shadow of Hyundai Steel's massive integrated works in Dangjin on Korea's west coast – has a decades-old relationship with JFE Steel for technology and feeds supply, Mysteel Global notes.
"In addition, the AD tax is not applied if it is recognized as a re-exported product," the Tekko Shimbun observes. "South Korea's major sheet rerollers export about half of their products, and there is room for (Japanese HRC) to continue to be used as substrate material," it suggests.
And then there's the issue of Korean HRC exports to Japan which, though smaller than Japanese coil heading the other way, nonetheless reached 709,000 tonnes during January-October this year, up 3.6% on year, the JISF data show. Admittedly, the average unit price of the 74,500 tonnes of Korean HRC that Japan received in October was $760/t CIF, about 35% more expensive than Japanese HRC landing in Korea that same month.
"Seen from the current situation," one Japanese source remarked, "it is in an environment where such an issue may be satisfactorily settled in the Japan-Korea steel dialogue forum."
Source:Mysteel Global
