The "K-Steel Act," designed to support the development of the steel industry, takes effect today. The law requires the government to establish a master plan for strengthening the steel industry's competitiveness and to reflect measures for expanding the supply of electricity, water, and hydrogen in government plans. It supports the research, development, and commercialization of low-carbon steel technology, an area in which Korea has been a leader, and makes it possible to designate special districts. The law also includes tax reductions and employment retention subsidy benefits for business restructuring.
The implementation of the K-Steel Act to respond to China-driven steel oversupply and global trade pressure is welcome, but it is regrettable that the law omits the steel industry's long-cherished demand for electricity rate reductions. The steel industry is now in an urgent situation, required to increase the share of eco-friendly methods in line with the government's policy to cut greenhouse gas emissions by 53 to 61 percent from 2018 levels by 2035. To produce one ton of steel, the eco-friendly electric arc furnace method consumes up to twice (400 to 600 kWh) the power of the conventional blast furnace method, while the hydrogen reduction steelmaking method consumes up to more than ten times (3,000 to 4,000 kWh). Nevertheless, both ruling and opposition parties enacted the K-Steel Act while leaving out measures to ease electricity rates.
The biggest problem lies in the fact that industrial electricity rates have surged more than 70 percent over the past five years, in the aftermath of the Moon Jae-in administration's excessive nuclear phase-out policy and other factors. Korean steel companies, already struggling under the low-price offensive of Chinese products, have lost their capacity to invest after being hit with an unbearable electricity bill bomb. While China and Japan newly built or expanded electric arc furnaces by 23 million tons and 5.22 million tons respectively since 2022, the only new domestic electric arc furnace construction was POSCO's 2.5 million-ton addition at its Gwangyang Steel Works. Under these conditions, a revival of the steel industry cannot be expected.
It is fortunate that, however belatedly, the opposition party has proposed a bill to ease the electricity rate burden on steel companies that use low-carbon steel technology. The Ministry of Trade, Industry and Energy must also abandon its lukewarm attitude toward easing electricity rates for the steel and petrochemical industries, an attitude it has justified by citing World Trade Organization (WTO) rules banning subsidies. The United States and China are effectively neutralizing the WTO system while spraying large-scale industrial subsidies. The ruling and opposition parties and the government must not rest content with the K-Steel Act, but should gather their wisdom to devise measures to resolve the electricity bill bomb that will revive the steel industry's cost competitiveness. Now is the time to protect the sinking steel industry with a more aggressive stance.
