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On Friday April 17, The country’s Financial Services Commission (FSC) pledged up to $80 trillion Won ($54 billion) to support a range of industrial sectors, including the steel industry, citing rising logistics costs and ongoing supply chain disruptions linked to the Middle East conflict, according to local media reports.
The announcement came following a meeting of steelmakers and financial institutions chaired by FSC Chairman Lee Eog-weon to assess industry conditions and coordinate a response.
“The recent Middle East crisis is intensifying pressure on the industry, with higher logistics costs, supply chain disruptions and tariff policies in the US and EU adding to the burden,” Lee said.
The FSC outlined three main financial support measures: lending facilities, corporate bond programs and investment assistance for companies affected by the crisis.
The lending programme – which comprises 53 trillion Won in private-sector financing and 25.6 trillion Won from policy lenders under an expanded supplementary budget – is expected to ease funding conditions and reduce borrowing costs for steelmakers.
In addition, support for small and medium-sized enterprises will be channeled through the P-CBO program from June. Under this program, the Korea Credit Guarantee Fund will provide guarantees for lower-rated companies that face difficulties in issuing corporate bonds, with the authorities expecting issuance costs to fall by around 50 basis points.
To address longer-term structural challenges, the FSC also said it would launch a 1 trillion Won Corporate Restructuring Innovation Fund in April, aimed at improving the financial structures of six industries: steel, petrochemicals, semiconductors, automobiles, displays and batteries.
Market participants largely welcomed the measures, noting that costs had risen sharply since the start of the Middle East conflict, adding further pressure on South Korean mills.
Freight rates, for instance, have surged to $28-35 per tonne, up from around $18 per tonne prior to the US/Israel attacks on Iran on February 28 and its wide-ranging response across the Middle East, eroding the economic viability of procuring raw materials from overseas.
Sources said that Hyundai Steel has suspended new export offers for steel sections, including H-beams, amid elevated raw materials and energy costs.
Skepticism remains, however, with market participants noting that weak domestic construction activity continues to weigh on the steel sector, limiting the effectiveness of earlier government interventions, such as the K-Steel Act.
“The [South Korean] steel sector [is] still facing headwinds from weak construction [activity], although there has been government assistance,” a South Korean trade source told Fastmarkets.
Against a backdrop of narrowing margins and competitive pressures from lower-priced Chinese material, mills – including Hyundai Steel – have increasingly shifted focus toward higher value-added products, such as automotive steel sheet and the ultra-wide steel plate used in offshore wind projects, to protect profitability.
“It remains to be seen how this will play out,” a Singapore-based trade source told Fastmarkets.
Fastmarkets’ monthly price assessment for steel scrap H2 Japan origin import, cfr main port South Korea was ¥53,000-55,000 per tonne on April 2, up ¥4,000-5,000 per tonne from ¥49,000-50,000 per tonne on March 6.
And Fastmarkets’ monthly price assessment for steel scrap, HMS 1&2 (80:20) deep-sea origin import, cfr South Korea was $380-390 per tonne on April 2, strengthening by $30-35 per tonne from $350-355 per tonne on March 6.
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