Rising global demand for artificial intelligence (AI) data center construction is fueling hopes of a windfall for Korea's steel industry, which has been struggling with a downturn.
According to the Ministry of Trade, Industry and Energy on the 12th, steel exports in June reached $2.14 billion, up 9.6% from the same month last year. The increase is attributed to growing material demand from expanded data center construction overseas, including in the United States. It marks the first time steel exports have turned to growth since April last year.
Exports to the U.S. showed a particularly strong rise. According to the Korea Iron & Steel Association, export volume in the first half of this year totaled 14.34 million tons, a slight increase from 14.23 million tons during the same period last year. Exports to the U.S. in particular surged 58.3%, from 1.39 million tons in the first half of last year to 2.2 million tons this year.
The steel industry expects that as data center construction moves into full swing, demand will continue to grow not only for rebar and section steel but also for steel pipes used in cooling equipment. Park Kwang-rae, a research fellow at Shinhan Securities, said, "Exports rose on solid U.S. rebar demand, which in turn reduced domestic supply and led to higher distribution prices."
Domestic steelmakers are also moving quickly. POSCO has established a Future Demand Development Office to jointly develop products such as cooling water tanks for data centers and specialty steel for semiconductor plants. Hyundai Steel (004020) has been operating a "Next-Generation Power Infrastructure Sales Expansion Task Force (TFT)" since March, targeting the AI infrastructure market and covering data centers, energy storage systems (ESS), and power transmission equipment. Dongkuk Steel Mill (460860) is targeting the data center market with its D-Mega Beam, a customized large section steel it first produced last year.
Still, some caution that optimism is premature. Data center demand is concentrated in certain products, and adverse factors lurk everywhere, including raw material cost burdens from the high exchange rate, oversupply from China, and strengthening trade barriers. Lee Jae-yoon, a senior research fellow at the Korea Institute for Industrial Economics and Trade, said, "Earnings improvement will be possible only when responding to trade regulations, defending the domestic market, and creating new demand all proceed in parallel."
The European Union's reduction of tariff-free quotas is another challenge. Starting this month, the EU has cut its annual tariff-free import quota by 46% and is imposing a 50% tariff on volumes exceeding it. Through the government's active response, Korea significantly reduced the scale of its tariff-free quota cut, but its quota was still trimmed by 510,000 tons (19.7%) annually. The government plans to strengthen support for the industry by expanding downstream industry linkages and mandating the submission of crude steel origin information for imported steel products.
